Why Ctrip.com International Ltd. Shares Could Pull Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Ctrip.com International  (NASDAQ: CTRP  ) slipped more than 1% this morning after Stifel Nicolaus downgraded the Chinese online travel company from buy to hold.

So what: Along with the downgrade, analyst George Askew removed his price target of $58, suggesting that he sees limited upside to the stock's current valuation. So while momentum traders might be attracted to Ctrip's price strength in recent months, Stifel's call could reflect a sense on Wall Street that that the risks surrounding the company's growth trajectory are being largely overlooked. 

Now what: Stifel lowered its 2014 revenue outlook for Ctrip to $1.13 billion from $1.6 billion and its 2015 view to $1.42 billion from $1.47 billion. "Air China, one of the Top 3 airlines in China, has announced that it will reduce its base air-ticketing commission rate from 3% to 2% on all domestic Chinese flight tickets sold by travel agents beginning July 1, 2014," noted Askew. "We believe the effective commission reduction if other airlines follow may approach 8% to 10% of Ctrip's air ticketing revenue in 2015. ... We believe it is likely that other Chinese airlines will follow Air China's example, particularly the number one and two players China Southern and China Eastern." Given Stifel's solid stock-picking track record -- currently ranked in the top 5% of our CAPS community -- Ctrip bulls should at least take a closer look at those risks. 

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