Billionaire Howard Marks’ Oaktree Capital recently disclosed a new position in MakeMyTrip (NASDAQ:MMYT). The fund bought a stake worth about $52.4 million. MakeMyTrip is India’s major online travel company. It sells flights, hotels, holiday packages, and bus and cab tickets. The stock is down about 25% so far this year. Is now the time to buy?
What MakeMyTrip Does?
MakeMyTrip runs India’s major travel booking platform. Its revenue primarily comes from air tickets, hotels and packages, and bus tickets. A growing “other” bucket covers cabs, tours, and add-ons.
The long-term pitch is simple. Indians are traveling more. As incomes rise and more people in smaller cities start booking online, the whole market grows, and MakeMyTrip is the biggest player in it.
The Latest Earnings
MakeMyTrip recently quarter shows its gross bookings grew about 20% and revenue grew about 16% in constant currency. The mix is the story. Air was weak. International flight departures fell 13% because the Middle East conflict disrupted travel and pushed airfares up. Hotels and packages profit grew 21%. Bus ticketing margin grew 32%.
Howard Marks of Oaktree Capital Management
The Bull Case
Travel demand is increasing rapidly despite pricing pressures. When travel becomes expensive, customers just switch to buses, cabs, short domestic trips, and hotels. MakeMyTrip sells all of it, so it captures the demand no matter how it shifts. That is why the company kept growing through a bad quarter for air travel.
Domestic travel has a long runway as more people move up the income ladder and book online for the first time. MakeMyTrip is the market leader, so it gains the most as the market grows.
AI is cutting costs for the company. The company says its AI now writes 75% of its code and handles half of its customer service calls with no human. That holds down staff and outsourcing costs even as the business grows.
The Bear Case
The air business is under real pressure. International departures dropped 13%, and if the Middle East conflict flares up again, airfares stay high and travel demand stays soft. Air is still a big part of the business, so weakness there drags the whole company.
Competition could also be a major problem for the company in the future. Booking.com and Airbnb want more of the India market, and big hotel chains like Marriott push customers to book direct and skip the middleman. Both trends chip at MakeMyTrip’s share and margins. To fight back, the company spends more on discounts and rebates, which eats into profit.
While we acknowledge the risk and potential of MMYT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MMYT and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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