Today, Despegar.com, Corp. (NYSE:DESP), a premier travel technology company in Latin America, announced the sale of its Destination Management Company (DMC), BDExperience, to World2Meet, a travel division of the Spain-based Iberostar Group. The transaction, which took place on August 1, 2024, is part of Despegar's strategy to hone its focus on core growth initiatives and improve operational efficiency.
BDExperience, with over 30 years in the travel industry, specializes in airport transfers, tours, and tourist assistance. As part of the agreement, World2Meet will become a preferred partner for Despegar, offering destination services in Mexico and the Dominican Republic. This move will allow Despegar to allocate more resources towards its primary business and enhance its organic growth.
The divestiture includes the transition of nearly 600 BDExperience employees to World2Meet, marking a significant shift in Despegar's business structure. Despegar has made significant strides in the Latin American travel market over the past two decades, incorporating a range of services such as Decolar, Best Day, Viajes Falabella, Viajanet Stays, and Koin into its portfolio.
Operating in 19 countries, Despegar has been instrumental in transforming the travel experience in Latin America, offering alternative payment and financing methods to make travel more accessible. This move is anticipated to further solidify Despegar's position in the travel industry by allowing it to concentrate on its primary market offerings.
In other recent news, Despegar.com has experienced a series of notable developments. The company reported robust financial performance for the first quarter of 2024, with gross bookings increasing by 12% to reach $1.3 billion and revenue climbing by 9.2% to total $174 million. Adjusted EBITDA saw a significant jump of 126% to $39 million, and adjusted net income rose sharply by 68% to $22.4 million.
Analysts have responded to Despegar's strong results with several upgrades. Citi raised the price target for Despegar.com to $15.00, citing improved EBITDA margin. B.Riley also increased its price target to $19.00, maintaining a Buy rating on the stock. Similarly, Cantor Fitzgerald raised its price target to $17.00, maintaining an Overweight rating, following the company's impressive earnings report.
On a more somber note, Despegar.com announced the unexpected death of board member and audit committee chairman Mario Eduardo Vasquez. In the interim, Nilesh Lakhani will serve as an audit committee member, with Michael James Doyle taking over as the committee's chair. The company is set to appoint a new board and audit committee member promptly.
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In light of Despegar.com's recent divestiture, it's worth noting that the company holds more cash than debt on its balance sheet, which could provide them with the financial flexibility to focus on their core growth initiatives. Additionally, Despegar's net income is expected to grow this year, which may signal a promising outlook for the company post-transaction. The company's gross profit margins remain impressive at 68.22% over the last twelve months as of Q1 2024, reinforcing the strength of their business model in the competitive travel industry.
From an investment perspective, Despegar's stock price movements have been quite volatile, with a 23.33% decrease over the past month, yet showing a substantial 31.97% return over the past year. With a current market capitalization of $853.28M and a high earnings multiple of 116.99, investors may weigh the potential for growth against the valuation. For those interested in a deeper dive into Despegar's financial health and future prospects, there are 12 additional InvestingPro Tips available at InvestingPro.
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