On Monday, Citi maintained its Neutral rating on Despegar.com (NYSE:DESP) with a consistent price target of $15.00. The firm updated its model in anticipation of the third-quarter 2024 results, taking into account the company's new revenue and EBITDA guidance. While acknowledging improvements in take rates and margins, Citi also noted potential deceleration in bookings within key markets such as Brazil and Mexico.
In Brazil, the forecast is cautious due to the anticipated tougher comparisons with the second half of 2023, which saw a unique competitive situation with multiple travel platforms going bankrupt simultaneously. For Mexico, the outlook incorporates a decrease in transactions following the sale of DMC, which accounted for approximately 20% of the region's transactions. This is expected to be somewhat mitigated by modest organic growth.
Citi has adjusted its revenue projections for Despegar.com to align with the company's revised guidance, which now indicates a minimum revenue of $760 million, down from the previously estimated $820 million. However, the firm has also integrated improved margin expectations in line with Despegar's updated EBITDA guidance, which suggests a minimum of $160 million, an increase from the former forecast of $155 million.
After revising its figures based on the new guidance, Citi concluded that there is still potential for upside in Despegar's financial performance. Nonetheless, the adjustments were not sufficient for Citi to change its overall stance on the stock, resulting in the decision to maintain the Neutral rating.
In other recent news, Despegar.com, a leading travel technology company, has announced a series of strategic partnerships and financial results. A partnership with Nubank, a digital banking platform, will integrate NuPay into Despegar's travel services, offering a new payment option and expanding market reach.
Despegar also reported a 46% year-over-year revenue growth rate for Q1 2024, with revenues reaching $185 million. Adjusted EBITDA and net income showed significant increases, with adjusted EBITDA up 22% to $37 million and adjusted net income soaring by 397% to $30.2 million. Despite these positive results, the company revised its 2024 revenue guidance downward to an 8% increase due to factors such as foreign exchange and pricing challenges.
In addition to this, Despegar.com has announced a 10-year Lodging Outsourcing Agreement with Expedia (NASDAQ:EXPE) Group, set to begin in 2025, aimed to optimize Despegar's lodging supply and facilitate long-term growth. TD Cowen has raised its price target on Despegar.com's stock to $12.00, maintaining a Buy rating.
These are recent developments from Despegar.com.
InvestingPro Insights
Despegar.com's financial landscape offers some intriguing insights that complement Citi's analysis. According to InvestingPro data, the company's revenue for the last twelve months as of Q2 2024 stood at $740.52 million, showing a robust revenue growth of 20.34% over the same period. This aligns with Citi's revised revenue projections and suggests that Despegar.com is on track to meet its new guidance of at least $760 million.
The company's gross profit margin is particularly noteworthy at 69.53%, which InvestingPro Tips highlight as "impressive gross profit margins." This strong margin performance supports Citi's observation of improved take rates and margins, potentially contributing to the increased EBITDA guidance.
Additionally, an InvestingPro Tip indicates that "analysts predict the company will be profitable this year," which could be a positive sign for investors despite the current negative P/E ratio of -73.68. This prediction aligns with Citi's view of potential upside in Despegar's financial performance.
For readers interested in a deeper dive into Despegar.com's financials and future prospects, InvestingPro offers 11 additional tips that could provide valuable insights for investment decisions.
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