- Despegar.com had a successful debut on Wall Street, with its stock closing 24% higher on its first day of trading. Since then, shares have fallen significantly.
- The company appears to have a very low average customer satisfaction, with many negative reviews found on sites like Trustpilot.
- While shares look cheap, we believe it could be a value trap and that the company will face increased competition from the likes of Airbnb and Booking.
Despegar.com (NYSE:DESP) is one of those companies that went public at a lofty valuation, and has since experienced a massive reduction in its share price. Its IPO price was $26, and it finished the day at $32, showing an impressive 24% gain on its first day. At that price, it was valued at around $2 billion. Part of the excitement was the result of Despegar being a leading online travel agency in the Latin American market, and experiencing very strong growth at the time. Despite being an Argentinian company, its main markets are Brazil and Mexico.
We thought that the price decline could mean shares potentially being now attractively valued, but as we started to investigate in more detail, we reached the opposite conclusion. Despite the shares losing about three-quarters of their value, we still believe it is probably better to avoid them.
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