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Why Didn't Qunar Rally On Ctrip's Blowout Quarter?

Ctrip reported blowout Q3 numbers that provide a strong read for the upcoming results of Qunar.

Investors appear uneasy regarding the new relationship that might favor Ctrip over Qunar.

The recommendation is to use an overreaction to finally own stock in Qunar with the expectation of better financial discipline going forward.

The blowout Q3 numbers by Ctrip (NASDAQ:CTRP) should've been a bullish harbinger for Qunar (NASDAQ:QUNR). After all, the two companies, along with Baidu (NASDAQ:BIDU), worked out an arrangement where Ctrip now owns a large part of Qunar and in theory reducing competition in the sector.

My biggest issue with Qunar is the overly aggressive spending in order to build up the online travel booking market in China and to grab a leading market position. The fear was that the competition between the two firms would depress profits until the recent completion of the deal changed that mindset.

To highlight the deal, Baidu traded the shares it owned in Qunar for a roughly 25% position in Ctrip. Ctrip now owns 178.7 million Class A shares and 11.5 million Class B shares of Qunar. The position gives Ctrip virtual control of Qunar with 45% of the related voting rights.

For Q3, Ctrip...