Deutsche Bank Downgrades Qunar Cayman Islands (QUNR) to Hold

Deutsche Bank downgraded Qunar Cayman Islands (NASDAQ: QUNR) from Buy to Hold with a price target of $38.00 (from $48.70). Analyst Alvin Jiang thinks the first half of the year will be difficult.

"From 1Q16, we expect Qunar to begin changing to better adapt to the postmerger structure. 1H16 will likely be tough for the company due to the turnaround in strategy and the ongoing conflicts with the airlines," said Jiang.

The analyst added, "Given Qunar's overlap with Ctrip in the airline and hotel businesses, we expect Qunar to make some changes after the merger. With hotels, the company will discontinue its hotel merchant model in 2016 and take a step back from the high end hotel market. The new focus will be to expand more into tier 3-4 cities, in order to ease competition with Ctrip and strive for differentiation. With regard to the airline business, the boycotts from China Airlines, Southern Airlines and Haina Airlines depressed growth in 1Q16. These conflicts have forced Qunar to better use innovation and technology to provide more value-add rather than competing simply on price. We expect Qunar’s top-line growth to slow down significantly in FY16 as a result of changes in both segments, while margins should improve. Margin improvement and successful differentiation will be the two key focus areas in the future."

For an analyst ratings summary and ratings history on Qunar Cayman Islands click here. For more ratings news on Qunar Cayman Islands click here.

Shares of Qunar Cayman Islands closed at $36.07 yesterday.

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