Friday - B.Riley has increased the price target for Despegar.com (NYSE: NYSE:DESP) shares to $19.00, up from the previous $16.00, while maintaining a Buy rating on the stock. This adjustment comes as a response to the company's impressive first-quarter results and an improved EBITDA forecast for the year.
The firm's decision to raise the price target is based on Despegar.com's strong growth and profitability, as reflected in the first quarter's performance. The company's margins have notably benefited from cost reduction efforts made in the fourth quarter of 2023, as well as year-over-year leverage.
The analyst highlights that despite these gains, Despegar.com's management is choosing to invest in strategic initiatives, which include business-to-business (B2B) ventures, mobile platforms, loyalty programs, and offline channels, aiming to secure continuous robust growth in the mid to long term.
Despegar.com's performance is further supported by robust foreign exchange-neutral growth in both revenue and bookings. This indicates not only solid underlying business fundamentals but also the success of the company's focus on package sales and its B2B strategy. These factors contribute to the analyst's perspective on the stock's potential.
The valuation of Despegar.com at approximately 7 times enterprise value to EBITDA (EV/EBITDA) is seen as an attractive risk/reward proposition by B.Riley. The firm's perspective underscores confidence in Despegar.com's business model and its prospects for future financial success.
InvestingPro Insights
Following B.Riley's optimistic outlook on Despegar.com, InvestingPro data provides additional context to the company's financial health and market performance. With a market capitalization of $835.78 million and a substantial revenue growth of 31.24% over the last twelve months as of Q4 2023, Despegar.com demonstrates a strong capacity for expansion. The company's gross profit margin stands at an impressive 67.65%, reinforcing the positive sentiment surrounding its profitability.
InvestingPro Tips suggest that Despegar.com holds more cash than debt on its balance sheet and analysts predict the company will be profitable this year, which may appeal to investors looking for financially stable companies with growth potential. It's important to note that while the stock price movements have been quite volatile, the company has experienced a high return over the last year, with a 112.54% price total return.
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