KeyBanc: Despegar Is Latin America's Underappreciated Online Travel Agent

Investors searching for a fresh online travel name should look south, according to KeyBanc Capital Markets.

Buenos Aires-based Despegar Com Inc DESP “has all the key ingredients necessary to benefit as the region remains 10 years behind developed markets for internet, e-commerce and online travel adoption,” analyst Brad Erickson said in a recent note.

KeyBanc initiated Despegar.com, which launched its American IPO in September, at Overweight with a $40 price target.

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Depsegar is Latin America’s only pan-regional online travel agent, and its positives include an “improving travel supplier inventory, [a] highly agile tech platform and critical enabling tools like customer financing to drive share gains,” Erickson said.

After several years of a recession in Latin America, Despegar is growing significantly amid more stable macroeconomic conditions, according to KeyBanc (see Erickson's track record here).

The stock is underappreciated, Erickson said.

“While the opportunity for online travel growth is fairly obvious after viewing Latin America’s relative underpenetration, more interesting to us is the comparison to other online travel agents’ relative market size, market share and market cap.”

Opportunity In Hotels, Vacation Packages

KeyBanc’s projections for Despegar call for “somewhat declerating growth in the out-years,” with more of the company’s growth coming from non-air travel segments of the website.

The largest upside driver for Despegar is hotels and packages, Erickson said. The company’s IPO is funding hotel inventory prepayment, “which should drive opaquely priced packages and increase take rates,” the analyst said.

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