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Why Despegar Soared 62% in November

By Andrew Tseng - Dec 8, 2020 at 5:17PM

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The company's been in the eye of the storm, but things may be looking up.

Shares of Despegar ( DESP -2.91% ) soared 62% in November, according to data from S&P Global Market Intelligence. That move sent the online travel company's stock from $6.80 per share to $11.04 during the month.

For context, Despegar shares were still down 18% for the year through November but have climbed back from being down as much as 63% for the year in May.

What happened

Despegar reported third-quarter earnings in November that showed an enormous but not surprising decline in business activity on a year-over-year basis. Gross bookings -- the total amount of travel spent on the platform -- were down 86% year over year but more than tripled sequentially from the second quarter.

The company appears to have plenty of cash to weather the rest of this storm. As of the end of September, Despegar had $375 million of cash on the books.

Perhaps more importantly, positive vaccine news out of Pfizer and BioNTech as well as Moderna about the safety and efficacy of their COVID-19 vaccines also drove up the stocks of several travel-related businesses.

A woman walks through an airport, dragging a suitcase on wheels.

Image source: Getty Images.

So what

Despegar is the leader of the online travel business in Latin America. COVID-19 has ravaged the global travel market this year, and Despegar has not been an exception.

But travel conditions have clearly improved from the low earlier this year. And the positive vaccine developments we heard in November should help travel-related businesses continue their recoveries next year.

The company's negative cash flow was only about $25 million in the quarter, so the $375 million of cash on hand appears to be enough to help the business reach the eventual recovery.

Now what

As an online travel business reliant on travel bookings, Despegar has been in the eye of the COVID-19 storm this year. But things may be looking up. Investors should expect the company to see further improvements to the extent these vaccines are effective against the coronavirus. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Despegar.com Stock Quote
Despegar.com
DESP
$8.35 (-2.91%) $0.25
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$54.27 (2.32%) $1.23
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$306.72 (1.74%) $5.23
BioNTech SE Stock Quote
BioNTech SE
BNTX
$344.06 (3.17%) $10.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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