What happened
Shares of Despegar (DESP 3.03%) took flight in January, soaring 21.1% in the month, according to data by S&P Global Market Intelligence, as several analysts either reiterated their generally bullish sentiment on the stock or upgraded their outlook for the Latin American online travel site.
Despegar stock fell 24% in 2021 and had lost nearly three-quarters of its value from the highs reached last March. But as the region's biggest booking agent, it had apparently become too discounted to ignore anymore.
Image source: Getty Images.
So what
The omicron variant of COVID-19 sapped some of the strength in travel and tourism in Latin America, much as it did in the rest of the world, but Citi analyst Sergio Matsumoto thinks the market doesn't appreciate Despegar's earnings power, which he believes the site should be able to flex after the first quarter.
Similarly, Cowen analyst Kevin Kopelman told investors in a research note that although bookings slowed in November due to coronavirus outbreaks and weakened currencies, he was keeping his outperform rating on the stock. He lowered his price target, however, to $11 per share from $13.
Now what
Despegar remains focused on improving travel options and has used the pandemic's crushing of the industry to make strategic acquisitions, such as its purchase of Best Day, a Mexican travel company, for a discounted $56 million, much lower than its original offer of $136 million.
Despegar itself could be open to an acquisition. Expedia owns a 14% stake in the travel agent and may find its own discounted value is an opportunity to buy out the rest.
In the interim, though, Despegar continues to branch out its offerings, having acquired an 84% stake in the fintech payments platform Koin, which allows travelers to pay for their trips in installments.
It's likely travel and tourism will remain volatile in Latin America. The region is not known for its political, economic, or monetary stability, but as home to some of the biggest emerging economies, it represents a huge growth opportunity anyway.
