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We Expected too Much

Stock (Symbol) Stock Price

Ctrip.com (CTRP)

$43

Data is as of Expected to Report Sector

June 29, 2011

Aug 8

Retail & Travel

Sharek’s Take
David SharekI almost sold CRTP after doing this quarter’s research. The company said sales this quarter would be $118-$123 million, lower than the $132 million street estimate. This shortcoming lowered quarterly and annual profit estimates. At this point, I can’t give CTRP anything more than a 35 P/E, and limits upside.
 
I’ve always liked CTRP for the long-term, but feel estimates could continue to decrease. I feel like I’m missing other opportunities waiting for CTRP to get through 2011. Travel in China is coming in below expectations because last year the country hosted the World Expo, and companies are feeling pressure because they overestimated what they would make this year. 
One-Year Chart
In Ctrip’s one-year chart shows the stock around its lows. I think this stock will go back-and-forth for a while.
 
Estimates show 13% profit growth coming next quarter. My fear is estimates for 2QtrsOut will come in under the current estimate. I put CTRP’s P/E of 36 in red because I think this stock may only deserve a 30 P/E.
Profit Growth
Profits grew C5% last quarter on a 36% increase in sales. 26% growth is slow for Ctrip, which used to pump out 60% growth.
 
The company beat by 2 cents, but lowered this estimate by 3 cents a quarter earlier. So its not really a beat.
 
Annual Profit Estimates are disappointing. We expected too much. Estimates are declining, which means this stock is stuck in neutral. The thing I really don’t like is profits are expected to grow only 10% this year.
 
Quarterly estimates are good and bad. Mostly bad. These figures are in the decline as well.
Fair Value
Just two quarters ago I had CTRP’s Fair Value set at 45 times earnings. Last quarter I reduced it to 35 and now 30 is appropriate. This stock won’t move higher until it can get a handle on profit estimates and quit lowering them. 
Ten-Year Chart
I first purchased CTRP on 12/1/04 at $7 and then sold it 9/18/08 at $20> I repurchased it again on 12/28/09 at $37. This stock isn’t moving as it once was, part of that is because the P/E has been reduced from the 60s to the 30s.
 
The profit growth each year is excellent, so you see why I’m hesitant on selling CTRP.
Power Ranking Bottom Line
Growth Portfolio

18 of 20

For now I will continue to hold this stock, but might sell it if I purchase something more promising.
 
CTRP is the 18th best stock in the 20 stock Growth Portfolio Power Rankings. Only Energy stocks are below CTRP. I might sell this stock this quarter. CTRP is not in
 the Aggressive Growth Portfolio.
Aggressive Growth Portfolio

N/A

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