Why Ctrip.com Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese Internet travel company Ctrip.com (NASDAQ: CTRP  ) fell as much as 16% today on reports of an expansion of discounting.

So what: This morning Oppenheimer said that Ctrip would expand its coupon program to air tickets and the company's vice president confirmed reports. The price war between travel agencies is getting stronger and this will put more pressure on Ctrip's margins.  

Now what: The stock wasn't cheap to begin with, so more margin pressure isn't good for investors. Shares now trade at 23 times earnings, and impact of another coupon program could be big. I don't think there's a reason to buy the stock today and would wait and see how margins play out in coming quarters.

Interested in more info on Ctrip.com? Add it to your watchlist by clicking here.

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