China's leading travel portal seems to have forgotten its lowballing ways. Shares of Ctrip.com (Nasdaq: CTRP ) opened sharply lower today, after posting surprisingly weak quarterly results and issuing disappointing guidance.
Revenue climbed 20% to $129 million, as all four of Ctrip's booking categories -- hotels, air ticketing, corporate travel, and packaged tours -- delivered modest double-digit gains. But reported profitability moved only 12% higher to $41 million, or $0.27 a share. Product development, SG&A, and marketing costs all grew faster than Ctrip's top-line boost. Things would have gotten even worse on the bottom line if the company wasn't encountering a lower effective tax rate. Analysts had figured that Ctrip would earn $0.27 a share on $129.6 million in revenue.
Ctrip is targeting revenue to grow by 15% to 20% during the current quarter, just short of the nearly 25% revenue spurt that analysts were expecting. In the old days, that wouldn't have mattered. Ctrip had earned its reputation as a serial provider of conservative guidance. Six months ago, Ctrip was projecting "approximately 20%" growth in revenue for the first quarter. It came through with a 30% spike in revenue. The quarter before that, Ctrip's 39% top-line boost surged past the 30% to 35% pop it was publicly expecting. Go back another quarter and Ctrip's 49% revenue burst surpassed 35% to 40% it was pegging. This time around, it landed right at the high end of its projected range.
In other words, we can either begin to take Ctrip's outlooks seriously or see things really deteriorate toward the end of the quarter. Either way, investors don't seem to be interested in watching things play out.
What's behind Ctrip's decelerating growth and thinning margins? We'll know a bit more when smaller rival eLong (Nasdaq: LONG ) reports next week. Chinese hoteliers Home Inns (Nasdaq: HMIN ) , China Lodging (Nasdaq: HTHT ) , and 7 Days (NYSE: SVN ) will report later this month.
It's highly unlikely that the empowered Chinese are slowing in their travels. The more logical explanation is that the competition is getting smarter. Baidu (Nasdaq: BIDU ) recently closed on its majority stake in ad-based travel aggregator Qunar. Expedia (Nasdaq: EXPE ) acquired a bigger chunk of eLong earlier this year.
Ctrip can't afford to slow down now, yet analysts now have no choice but to believe its decelerating guidance. Life was so much easier for the portal when its outlooks couldn't be taken seriously.
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