On Wednesday, MakeMyTrip (NASDAQ:MMYT) experienced a shift in stock rating as Axis Capital (NYSE:AXS) Limited adjusted its stance on the company. The travel services provider was downgraded from 'Buy' to 'Add', although its price target saw an increase to $110 from the previous $90.
The adjustment in rating comes as the company has demonstrated consistent growth outperformance compared to its peers through fiscal years 2021 to 2024. However, the analyst at Axis Capital Limited cited "increasing evidence of demand normalization" as a factor that may interrupt the robust upward trend MakeMyTrip's stock has enjoyed, surging over 150% in the past year.
The new price target of $110 is based on a valuation multiple of 40 times the expected enterprise value to EBITDA for September 2026, which is an increase from the previous multiple of 35 times. This revision reflects a more conservative outlook for fiscal years 2026 and 2027, despite the firm's belief in MakeMyTrip's advantageous position to capitalize on long-term industry tailwinds.
Those tailwinds include rising disposable income, favorable demographics, and the potential for growth in outbound travel from India. The analyst emphasized MakeMyTrip's leading role in the market, which is expected to continue benefiting from these factors.
In other recent news, MakeMyTrip Limited has reported its most robust financial performance in the first quarter of fiscal year 2025. The travel company's gross bookings surpassed $2.4 billion, a 22% increase year-on-year. Revenue saw a significant rise, reaching $254.5 million, marking a 31.5% increase from the previous year. The adjusted operating profit also saw a substantial growth, reaching $39.1 million, a 30% year-on-year increase.
MakeMyTrip attributes these strong results to its diversified travel offerings and strategic focus on different travel segments. The company has also invested in AI to enhance user experience, and its accommodation, holiday packages, and corporate travel businesses have shown strong growth.
Despite the challenges posed by the pandemic, MakeMyTrip's strategic initiatives and investments in technology appear to be paying off, setting the stage for continued success in the upcoming quarters. These are just a few of the recent developments at MakeMyTrip.
InvestingPro Insights
Recent data from InvestingPro provides additional context to the narrative surrounding MakeMyTrip's (NASDAQ:MMYT) stock performance and valuation. Notably, the company holds more cash than debt on its balance sheet, which is a positive sign for investors looking for financial stability in a company. Moreover, MakeMyTrip boasts impressive gross profit margins of over 53% in the last twelve months as of Q1 2025, indicating efficient operations and strong pricing power.
However, the stock is trading at a high earnings multiple, with a P/E ratio of 49.04, suggesting that investors are paying a premium for its earnings potential. This aligns with the market's optimistic view of the company's growth prospects. Additionally, with a Price / Book multiple of 9.31, the valuation reflects high expectations for future growth, which is also seen in the company's significant revenue growth of nearly 30% over the last year.
For those seeking a deeper analysis, InvestingPro offers further insights, including tips on the company's valuation multiples and profitability forecasts. There are 16 additional InvestingPro Tips available for MakeMyTrip, which can provide investors with a more nuanced understanding of the company's financial health and market position.
Overall, while Axis Capital Limited's revised rating and price target reflect a cautious optimism, the InvestingPro data and tips suggest that MakeMyTrip's financial fundamentals remain strong, albeit with a high market valuation that anticipates continued growth and profitability.
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