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Why Despegar Stock Sank 25.6% in September

By Keith Noonan - Oct 8, 2020 at 9:37AM

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The pandemic continued to pressure the online travel company, but there was a bit of good news last month.

What happened

Shares of Despegar ( DESP -2.91% ) slumped 25.6% in September, according to data from S&P Global Market Intelligence. The Latin American online travel company lost ground amid a sell-off in the broader market and surges in newly diagnosed COVID-19 infections in many parts of the world. 

^SPX Chart

^SPX data by YCharts

Confirmed coronavirus cases continued to roll in at relatively high levels in countries across Latin America, and the resurgence of pandemic hot spots in Europe further dampened the near-term outlook for the travel industry. Despegar's stock slide last month followed a 10.9% increase for the company's share price in August. 

Two surgical maps on a laptop.

Image source: Getty Images.

So what

Like many companies in the travel sector, Despegar has been hit hard by the coronavirus pandemic. Brazil, Colombia, Argentina, Mexico, and Peru are among the countries with the highest numbers of confirmed COVID-19 infections, and economic pressures, government-imposed restrictions, and safety concerns have crushed online travel booking. While new coronavirus diagnoses in most large Latin American countries last month were falling or holding steady, not rising, their numbers were still high, and the ongoing issues created by the virus signaled that headwinds for the travel industry are unlikely to abate soon.

While September's virus trends signaled ongoing challenges for the company, Despegar did manage to secure $200 million in new funding -- courtesy of investments from L Catterton and Waha Capital. That influx of capital should put the business in a better position to weather a rough stretch for the travel industry.

Now what

So far in October, Despegar's stock price has climbed by roughly 3.4%. 

DESP Chart

DESP data by YCharts

Year to date, though, the stock is off by roughly 48%. Facing dim sales prospects in the near term, the company is making moves to reduce operating costs. Despegar has a market capitalization of roughly $490 million and is valued at 3.6 times this year's expected sales.

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