China’s largest online travel agency Ctrip’s stocks dropped by 24% last week following the release of company’s third quarter earnings report, which projected a bleak forecast for the next quarter.
The price hit a new low of USD 26.13 as the markets closed on Friday, November 9. On Monday it was further down to USD 25.55.
Ctrip, established in 1999, is one of the top four leading players in the segment along with Expedia, TripAdvisor and Priceline Group.
The stock price reflects its actual business performance, where the growth rate has witnessed a 6-quarter continuous fall from 76% in Q4 2016 to 11% in Q1 2018. The company’s stock has almost halved in the last five months.
Ctrip attributes new accounting standards and dull macro-economic environment as the reasons for low expectations. However, the growth rate is subject to change as the company has accounted for potential economic uncertainties in next year’s projection.
Stiff competition in the online traveling industry is making life difficult for Ctrip. According to Trustdata, Meituan-Dianping, Ctrip’s major rival, tops China’s online hotel reservation market in Q2 2018. Many emerging players are also putting pressure on the industry giant. For example, Fliggy, the online travel platform owned by Alibaba, has formed partnerships in various fields including international hospitality, air divisions and short-rental firms.
There is a silver lining
CEO Sun Jie reiterated Ctrip’s commitment to increase market share.
During Earnings Conference Call Jie revealed Ctrip’s GMV hit CNY 690 billion (USD 102.8 billion) in the past 12 months ending September 30, 2018 surpassing Expedia’s data of CNY 675.1 billion (USD 100.5 billion) and Booking Holdings’ CNY 91.2 billion (USD 13.6 billion), and ranked first in global online tourism industries. For the fourth quarter, Ctrip expects the revenue growth to continue at a year-on-year rate of 15-20%, from CNY 7.10 to 7.41 billion (USD 1.06 – 1.10 billion), marginally lower than the market estimation of CNY 7.47 billion (USD 1.11 billion).
Of late, the Nasdaq-listed company has intensified efforts to broaden its global reach. Ctrip launched its global brand Trip.com after acquiring the Silicon Valley-based start-up with the same name in November last year. Now it is foraying into the ride-hailing market with London-based Splyt.
With the overseas expansion, its quarterly financial results seem to indicate a fairly good performance with a 15% year-on-year surge in net revenue to CNY 9.4 billion (USD 1.4 billion). Its net loss fell from CNY 2.4 billion (USD 357 million) for the previous quarter to CNY 1.1 billion (USD 164 million) for the third quarter.