TD Cowen has made an adjustment to its outlook on Despegar.com (NYSE: NYSE:DESP), a leading online travel company. The firm increased the price target on the company's stock to $12.00, up from the previous target of $9.00, while maintaining a Buy rating.
The revision follows Despegar.com's latest financial disclosures. The company reported a modest increase in Gross Booking (NASDAQ:BKNG) Volume (GBV) of 4% for the second quarter. Despite this, Despegar.com revised its revenue guidance for 2024 downward, now expecting at least an 8% increase compared to the previously anticipated 16%.
The change in forecast is attributed to several factors, including foreign exchange and pricing challenges, the divestiture of its Mexico transportation business, and the impact of the second quarter's flooding in Brazil on its operations.
Despite the lowered revenue outlook, Despegar.com's margins showed improvement, prompting TD Cowen to raise its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance for the company by 3%. This enhanced profitability is credited to better cost of goods sold (COGS) and overhead leverage, along with a smaller-than-anticipated increase in marketing expenses.
The firm's analyst highlighted the company's continued robust transaction growth, which is trending upwards by more than 10%. This positive metric contributed to the decision to set a new price target of $12, which corresponds to a 15X multiple of the company's projected 2025 earnings per share (P/E).
InvestingPro Insights
Following the recent analysis by TD Cowen, InvestingPro provides additional insights into Despegar.com's financial health and market performance. With a market capitalization of $854.06 million, Despegar.com is navigating the competitive online travel sector with a notable gross profit margin of 69.53% for the last twelve months as of Q2 2024, indicating strong efficiency in its operations. Despite not being profitable over the last twelve months, analysts are optimistic, predicting profitability for the company this year.
InvestingPro Tips suggest that Despegar.com holds more cash than debt on its balance sheet, which may provide financial flexibility in uncertain economic times. In addition, the company's net income is expected to grow this year, potentially signaling an upcoming positive shift in its financial trajectory. For investors looking for more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/DESP.
Real-time data shows a mixed picture in terms of stock price performance, with a significant 25.52% drop over the last three months, but a notable recovery with a 28.65% uptick over the last six months. The company's stock is currently trading at $11, which is below the fair value estimate of $12.39 by InvestingPro, and even further below the analyst target of $17. These figures may suggest a potential undervaluation, offering an attractive entry point for investors who believe in the company's long-term growth prospects.
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