China's online travel agency,
Ctrip.com International Ltd.
) shares plunged 9.0% to $40.49 on Jan 9, 2014 from $44.51 as of
Jan 8, 2014 due to stiff competition and aggressive investments
made by the company in 2013 that might hurt margins, going
A leading Chinese online travel agency
Qunar Cayman Islands Ltd
) is posing stiff competition for Ctrip.com's airline ticketing
business of late. Per a survey, Qunar's ticket-booking apps are
frequently used for booking air tickets, train tickets and other
travel related bookings, which might hurt the company's business.
The entry of companies like Qunar is expected to intensify
competition for Ctrip.com and compel it to offer discounts,
thereby eroding profits.
In order to survive in this competitive environment, Ctrip has
been making aggressive investments, which is also a matter of
concern. Recently, the company announced that it will spend
$100.0 million for the purchase of ToursForFun, a rival
Chinese-language travel site. In 2013, the company purchased eHi
Car Services, a privately held car rental company; a car rental
business Yongche and travel search engine Kuxun.
Besides investing in an e-commerce tourism ticket platform,
the company is also spending on promoting its mobile booking
service and mobile apps. Though these investments are expected to
benefit the company in the long run, these could be an overhang
on earnings and margins in the near term.
In fact, we note that the Chinese financial markets have not had
a great start to 2014, following a slowdown in manufacturing and
service activities as well as a lack of liquidity. (Read:
China ETFs Tumble to Start 2014
). Given the scenario, Chinese stocks declined, lowering the
benchmark index to its lowest level over the past five months on
Jan 5, 2014.
Ctrip.com International Ltd. currently has a Zacks Rank #1
(Strong Buy). Other players in the industry, which look
attractive at current levels, include
Bitauto Holdings Ltd
Vipshop Holdings Ltd
). Both these stocks carry the same Zacks Rank as Ctrip.com.
BITAUTO HOLDNGS (BITA): Free Stock Analysis
CTRIP.COM INTL (CTRP): Free Stock Analysis
QUNAR CAYMN LTD (QUNR): Free Stock Analysis
VIPSHOP HOLDNGS (VIPS): Free Stock Analysis
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