Ctrip.com (CTRP): Becoming A Margin Story - Oppenheimer
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Oppenheimer analyst, Jed Kelly, reiterated his Outperform rating on shares of Ctrip.com (NASDAQ: CTRP) as the company transitions to a margin story.
CTRP reported a solid 2Q16, with in-line revenue and non-GAAP operating margins 240 bps above the Street forecast. Organic hotel revenue decelerated to mid-20%, which the analyst attributed to a combination of new VAT taxes and maturing high-end accommodations. However, consolidated operating margins expanded 1,600bps y/y, reflecting CTRP's stronger competitive position.
The analyst stated "We will monitor hotel revenue, and are modeling a higher mix from lower-end markets, which carry better commissions, but higher couponing. Guidance for 3Q implies consistent revenue growth, and margins expanding ~1,000bps sequentially, which could leave less wiggle room for a typical margin beat. However, despite slowing organic revenue growth, we project non-GAAP operating-margins to expand ~1,500bps in two years, which should cause the stock to react positively".
No change to the price target of $55
Shares of Ctrip.com closed at $47.35 yesterday.
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