Despegar.com

DESP · NYSE

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The case for and against

Updated Nov 27, 2024

Bull case

Despegar.com Corp has demonstrated a robust market positioning through a notable 4% year-over-year increase in revenue, indicating a successful acquisition of market share from competitors in its primary market. Significant growth was observed in its Destination Services segment, achieving a remarkable 117% compound annual growth rate since 2020, and contributing to 30% of gross bookings as of the third quarter of 2023. Additionally, the company's bookings in Brazil surged by 40.8% year-over-year, supported by increased transaction volumes and anticipated expansions in EBITDA margins, suggesting a strong financial trajectory and improved free cash flow conversion moving forward.

Bear case

Despegar.com Corp's financial outlook appears negative due to several factors impacting its revenue growth and profitability. The company's performance has been hindered by currency weakening in 2019, leading to diminished reported revenue growth and overall profitability challenges. Furthermore, despite projected record bookings and revenue for FY23E, total transaction volumes remain approximately 16% below 2019 levels, raising concerns about potential margin pressures and de-leverage of fixed costs.

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