Late last month, I have downgraded CTRP to hold from buy as the stock hit my long term target of $70. I advised you to sell a portion of your holding as I anticipated selling pressure after the earning. Since then the stock has drifted lower from high of $74 level to $67. I also indicated that long term story for CTRP is intact and should there be a dip in the share price well below $65, you should be buying back your shares.
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CTRP reported Feb 07 earning Sunday evening. As I expected, the company reported solid revenue growth by largely inline Q. Reported revenue was 28.9 mil slightly above the consensus number of $28.5 mil. The bottom line number came in at 26 cents, inline with the street estimate. Given the high multiple that the stock is trading at, the stock had to beat the number by a solid margin and needed to guide the number higher for next Q.
However, the company's performance just came in as expected and even more disappointingly, the guidance calls for 30% YOY growth for FY 07 and 35% operating margin for the same fiscal year. Due to PE exceeding 35 based on 08 estimate, I felt that CTRP needed to maintain 40% or higher YOY revenue growth to justify additional gain in the share price from the current level.
These events will point to lower share price after tomorrow. And I believe my previous call to liquidate certain portion of CTRP was indeed correct one. I believe that over the next week, we may revisit low $60 to high $50 level for CTRP shares. In my opinion, CTRP's management is again being conservative with the guidance as it has been consistent in exceeding the consensus estimate. In my opinion, CTRP's long term story is intact and outlook for great growth ahead is better than ever. As such, I would continue to wait for a pullback and start buying back your shares in the low $60 dollars (anywhere between $62 to $64 level). Long term, CTRP will be a clear winner as Chinese economy continues to chuck along. Maintain as a top pick idea for 07.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
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$30.85 (02/12/07)
