By Rick Aristotle Munarriz
November 8, 2007
Silly analysts. They'll believe anything.
Ctrip.com (Nasdaq: CTRP) took a hit three months ago, after posting blowout second-quarter results and warning that third-quarter top-line growth would come in at a 35% clip.
How did that quarter ultimately shape up? Well, revenue soared 55% higher to $43 million at China's leading online travel booking agency. Earnings per share soared 68% to $0.26 a share before stock-based compensation expenses, or $0.21 per share on a reported basis. Wall Street was only banking on a profit of $0.17 a share.
Let me state the obvious: If 35% growth is a sandbag, you must be doing something right. Let's also break down the three product lines to drive two other points home.
- Hotel reservation revenue rose 40% on a 38% uptick in rooms booked.
- Airfare revenue climbed 76% higher on a 69% boost in the number of air tickets sold.
- Packaged tour sales grew by 61% during the quarter.
The first point is that every single segment grew by substantially more than the 35% bar that the company had set for itself. My second point -- and it's why I'm spelling out the number of nights and airline seats booked by Ctrip.com -- is that the company is milking slightly more off each transaction.
Ctrip is impressive. Smaller rival eLong (Nasdaq: LONG) reports next week, but don't bet on Ctrip's strength being contagious. As we saw last quarter, eLong is growing its top line at a much slower pace. It has also posted three straight quarterly losses.
Ctrip has now soundly beaten Wall Street's profit targets in each of this year's three quarters. You have to go back to the second quarter of 2006 to find the last time that eLong didn't come up short on the bottom line.
If you want to get even more excited about Ctrip, keep in mind that the company is running on all cylinders even before we get into the slam-dunk of next summer's Olympic Games in Beijing. Companies like Ctrip, lodging specialist Home Inns (Nasdaq: HMIN), and perhaps even eLong should have very strong results next year.
Ctrip is an easy sell as a story stock. Stateside portals like Orbitz Worldwide (NYSE: OWW), Expedia (Nasdaq: EXPE), and Priceline.com (Nasdaq: PCLN) are growing, yet nowhere near as quickly as Ctrip.
Unfortunately, that kind of scintillation comes at a price. Ctrip trades at nearly 60 times next year's projected profitability. That isn't cheap. It may not be as rich as Baidu (Nasdaq: BIDU) or Alibaba.com, but Ctrip also isn't growing as quickly as the Chinese leaders in search and B2B, respectively.
But what's that? Ctrip is now also saying that the current quarter will grow its revenue by at least 35%? That sandbag trap feels awfully familiar. Let's see if the analysts fall for it again.
Silly analysts. They really will believe anything.
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