Throw this stock away: Ctrip

July 23, 2008 | Online Travel

China's leading online travel agency has been a growth stock darling until peaking two months ago. Shares have fallen by more than 40% since. What's going on?

Isn’t the Chinese economy is booming? It sure is, growing at annualized clip of 10% over the past few years. Won’t more money mean more people in China get the travel bug? They sure will: The World Tourism Organization estimates that 100 million Chinese citizens will travel abroad come 2020, from 34 million just two years ago.

However, Ctrip’s valuation has always been rich. It can’t show any signs of mortality. As fate would have it, the upcoming Olympic Games may not be the slam-dunk PR win for China they hoped for. Forget the protests and boycotts. Have you seen the air pollution? Some athletes may even wear masks. In short, this is unlikely to be the postcard from Beijing that China imagined when it landed the blockbuster athletic event.

A Ctrip bull may counter that the Olympics are immaterial. Ctrip is a play on China’s own citizenry of 1.3 billion booking flights and hotels within the country. That is absolutely true, but a lot of Mr. Market’s interest in Ctrip has been on China’s arrival into the mainstream and it looks as though it may blow its late summer close-up.

Get the full story at The Motley Fool

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