Strong Week for Despegar and Jazz

On Thursday, Despegar.com (NYSE: DESP) announced fourth-quarter results. The results were strong, easily beating both revenue and EPS expectations ($144 million and $0.167 vs. $136 million and $0.141, respectively). As of noon Friday, the stock has jumped 10% from Wednesday’s closing price.

The underlying metrics indicate strong momentum.

On a year-over-year basis, transaction volume was up 19% for the quarter and 26% for the year. Total revenue increased 30% for the fourth quarter and 27% for the year. You may notice that even though transactions grew at a slower rate in the quarter than in the full year, fourth-quarter revenue actually grew faster.

Company Efforts Gaining Traction

This shows that Despegar saw a more favorable business mix as 2017 progressed. The company has been focusing on growing its Packages, Hotels and Other Travel Products segment, and the numbers show that the effort is working. Even though this segment accounted for just 43% of transactions in the fourth quarter, it contributed 54% of revenue. Average revenue per transaction in this segment also increased from $69.30 to $75.

Despegar’s other segment, Air (airline tickets), is highly competitive. Average revenue per transaction fell by 6% in 2017 to $45.60 as Despegar purposely cut the air fee in the third quarter in certain markets to try to gain market share.

Mobile Usage Also Up Convincingly

The company is also gaining traction in another important initiative: to increase mobile usage. Mobile transactions rose 45%, and its mobile app has exceeded more than 38 million cumulative downloads by the end of 2017. Compared to a year ago, it’s a 39% jump. 30% of transactions in the 2017 fourth quarter were completed on a mobile platform, up from 26% a year ago.

Overall, very good results and the market likes what it saw, as do we. Due to the fact that the stock does not receive a lot of coverage and still has relatively low trading volume, there’s likely going to be more ups and downs in its future, but we fully expect the long-term trend to be up.

Jazz Regaining Momentum

Jazz Pharmaceuticals (NASDAQ: JAZZ) has also had a good week, gaining about 8% from last Friday’s close. The company issued very good guidance in its earnings release and buyers are coming back to the stock.

2017 was a tough year for Jazz as sales for its key drug Xyrem were sluggish. However, Jazz forecasts sales growth of 12% for Xyrem in 2018. Last year, Xyrem sales only grew 7%.

Jazz has been trying to raise awareness for narcolepsy, and saw more new diagnoses in 2017, an indication that the effort is working. Management also noted that it’s seeing more government-pay patients at this time in 2018 than last year, another good trend. Since Xyrem is still by far Jazz’s largest drug, accelerated growth is clearly a major positive for the company.

Don’t Forget Vyxeos

Then there’s Vyxeos, the new drug launched in the third quarter last year. Early sales results have been above expectations and looking ahead Jazz calls for 2018 sales in the range of $130 to $155 million. This, too, is above The Street’s expectations.

The National Comprehensive Cancer Network (NCCN) recently added Vyxeos to its guidelines to treat Acute Myeloid Leukemia. The move includes a Category 1 (NCCN’s highest level) recommendation for the use of Vyxeos. The NCCN is a not-for-profit alliance of 27 leading U.S. cancer centers. Its inclusion of Vyxeos to the guideline raises physician awareness. Clearly, that’s a good thing for Jazz.

We currently rate DESP a “buy” up to $35 and JAZZ a “buy” up to “160.”

Stock Talk

Add New Comments

You must be logged in to post to Stock Talk OR create an account