Ctrip's a Heart Breaker

Shares of Ctrip.com (Nasdaq: CTRP) opened 6% lower this morning, after weak top-line guidance for the current quarter derailed a strong close to 2010.

Ctrip's fourth quarter revenue surged 39% to $119 million. Net income climbed even faster, soaring 59% to $0.30 a share -- or $0.36 a share before stock-based compensation expenses. The pros weren't even close. They were banking on a profit of $0.24 a share on $114.6 million in revenue.

The real stinker here is Ctrip targeting "approximately 20%" growth in revenue this quarter. This would be a dramatic slowdown, even if you back out a few small acquisitions that helped goose top-line growth through 2010.

I'll share a little secret with you that Wall Street doesn't seem to know given this morning's decline.

Let's just say that Ctrip's a serial low-baller.

Three months ago, Ctrip's outlook called for a 30% to 35% pop in the fourth quarter. We now know it was actually a 39% year-over-year advance. The quarter before that found Ctrip pegging its third-quarter revenue to grow between 35% and 40%. We got a 49% revenue surge.

A combination of a conservative Ctrip and to a lesser extent the ever-appreciating yuan is dealing positive surprises to analysts who don't seem to know better.

If you had to wager, bet on Ctrip growing well ahead of the 20% clip it's projecting for the first quarter.

The only real challenge for Ctrip investors is if they can stomach the valuation. Ctrip isn't cheap, but it's never been cheap. There are also several seemingly less expensive plays for those looking for some skin in the Chinese travel industry.

Source: Yahoo! Finance.

Ctrip, eLong, and Universal Travel book travel. Home Inns, China Lodging, and 7 Days are hotel chains. AirMedia runs an advertising network through China's largest airports. Ctrip commands the highest earnings multiple for the year ahead outside of eLong.

I still like Ctrip here. The stock has inched lower in recent months, but the 2011 profit target has crept higher. It remains the undisputed leader in this high-margin niche. It's a great play on China's fast-growing economy and its impact on both leisure and corporate travel.

Thank you for underselling the eventual reality, Ctrip. It opens the door for opportunists like me to consider the nibble I should have taken years ago.

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