On Friday, Citi updated its model for Despegar.com (NYSE:DESP) shares, leading to an increase in the price target to $15.00 from the previous $14.50, while the firm maintained a Neutral rating on the stock.
The adjustment follows Despegar.com's first-quarter performance, which revealed a deceleration in bookings year-over-year, but also demonstrated a higher take rate and potentially improved EBITDA margin.
Despegar.com, a leading online travel agency in Latin America, is continuing to expand its market share in key regions such as Brazil and Mexico. Despite the positive outlook for market share growth, the industry is facing challenges that prompted Citi to lower its Gross Bookings estimates for the company. Nonetheless, Despegar.com has shown better than anticipated SG&A discipline, which has contributed to the firm's decision to adjust the price target upwards.
The improved financial discipline at Despegar.com has led to higher margin expectations. Citi's analysis suggests that while the travel company is in a strong position to capture more of the market, the current stock price is already aligned with the firm's assessment of its fair value. Consequently, the Neutral rating has been reaffirmed, indicating that the analysts do not foresee significant stock price movement in the near term.
The potential for Despegar.com to outperform Citi's expectations lies in the possibility of further operational expenditure efficiencies, which could lead to higher EBITDA margins. The firm's updated valuation is based on a Discounted Cash Flow (DCF) method, which has factored in these improved operational efficiencies.
In other recent news, Despegar.com, the prominent travel technology company, has been making significant strides in its financial performance. The company's first-quarter results were impressive, with gross bookings rising by 12% to reach $1.3 billion. Revenue climbed by 9.2%, totaling $174 million, while adjusted EBITDA saw a substantial jump of 126% to $39 million. Adjusted net income also rose sharply by 68% to $22.4 million.
In response to these achievements, B.Riley raised the price target for Despegar.com shares to $19.00, up from the previous $16.00, maintaining a Buy rating on the stock.
Similarly, Cantor Fitzgerald increased its price target to $17.00 from the previous $14.00, maintaining an Overweight rating. Both firms' decisions were influenced by Despegar.com's strong growth and profitability.
These are recent developments, reflecting the company's focus on strategic initiatives such as business-to-business ventures, mobile platforms, and loyalty programs.
The company's management is investing in these areas to ensure continuous robust growth. This strategy, coupled with the company's strong financial performance, has led to positive adjustments in full-year revenue and adjusted EBITDA guidance.
InvestingPro Insights
As Despegar.com (NYSE:DESP) navigates the competitive landscape of the Latin American online travel market, recent data from InvestingPro provides additional context to Citi's updated model and price target. The company holds a market capitalization of $854.44 million, indicating its substantial presence in the industry. Despite a high P/E ratio of 138.82, which reflects investor confidence in future earnings potential, Despegar.com's impressive gross profit margin of 68.22% over the last twelve months as of Q1 2024 demonstrates its ability to maintain profitability in a challenging market.
InvestingPro Tips highlight that Despegar.com has more cash than debt on its balance sheet and is expected to see net income growth this year. These factors, alongside the company's ability to cover interest payments with cash flows, suggest a strong financial position that may appeal to investors looking for stability and growth potential. Moreover, the company's stock price has experienced a large uptick over the last six months, with a return of 44.86%, signaling a robust market performance that could catch the eye of those monitoring the sector.
For those seeking to delve deeper into Despegar.com's financials and future prospects, InvestingPro offers additional insights and tips, available through a subscription. By using the coupon code PRONEWS24, readers can receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to a wealth of investment information and analysis to inform their decisions. With more tips available on InvestingPro, investors can gain a comprehensive understanding of the factors driving Despegar.com's valuation and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.