Online Travel Is on Fire Overseas
Online travel portals have been good investments if you chose the top dogs in this country, but let's not dismiss the allure of international players with country-specific operations. China's Tuniu and India's MakeMyTrip were some of last week's biggest winners, soaring 52% and 30%, respectively.
MakeMyTrip's pop is easy to figure out. It posted encouraging quarterly results with revenue less service costs rising 31% -- or 45% on a constant currency basis -- to $28.5 million. The top-line growth was sparked by a 45% spike in hotel and vacation package bookings offset flat airline bookings. MakeMyTrip did post another loss, but it nearly broke even this time with an adjusted deficit of $0.01 a share.
The report was encouraging enough for Citigroup to initiate coverage with a buy rating. MakeMyTrip is a stock that's been largely ignored. The slow online migration in India and cascading rupee have made buying into the dot-coms in the world's second most populous nation a bit of a challenge. However, MakeMyTrip and portal operator Rediff.com have started to show signs of life lately. Rediff -- which for its part soared 31% last week as investor appetite for Indian growth stocks is booming -- hit an 11-month high on the week.
Tuniu toils away in a market that has been far more receptive for online travel companies. Ctrip.com has been a market darling for years. It may have stumbled a couple of years ago, but Ctrip shares have more than tripled over the past two years.
Tuniu went public earlier this month at $9. It wasn't a hot IPO at the start. The Chinese specialist in booking tour packages online actually traded as low as $8.52 on its first day of trading before bouncing back into positive territory. However, Tuniu was the Nasdaq's biggest winner last week with its 52% pop. It has gone on to move even higher today.
The market is starting to warm up to Chinese dot-com IPOs ahead of the defining moment when Alibaba goes public this summer. However, Tuniu deserves props on its own as China's leading online provider of organized tours. Like MakeMyTrip, it's still struggling with profitability, but revenue soared 72% last year to $324.2 million. The market has a knack for rewarding fast-growing Internet companies ahead of their eventual profitability. The only real surprise is why it took the market nearly two weeks before waking up to the growth story in Tuniu. Last week's successful MakeMyTrip report helped amplify the thesis, and investors should continue to look overseas for attractive Internet travel portals.
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The article Online Travel Is on Fire Overseas originally appeared on Fool.com.Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Ctrip.com International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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