MakeMyTrip's Premium Valuation Faces Earnings Test Amid Growth Catalysts

MakeMyTrip (NASDAQ: MMYT) trades at a valuation premium relative to its industry peers, but its recent financial performance and upcoming catalysts suggest investors are betting on sustained growth. With a Price-to-Sales (P/S) ratio of 10.72—far above competitors like Expedia (EXPE) at 1.42 and Booking Holdings (BKNG) at 6.32—the question is whether this premium is justified. Analysts have raised concerns about near-term headwinds, but the company's upcoming Q2 earnings report could reset expectations and bolster its Zacks Rank.

Valuation in Context: A Premium for Growth?

MakeMyTrip's premium valuation stems from its dominance in India's travel market and strategic investments in technology and loyalty programs. Its P/S ratio is more than double that of Expedia and nearly 70% higher than Booking Holdings, despite its smaller scale. While peers like Booking have a larger market cap ($150 billion vs. MakeMyTrip's $10.2 billion), MakeMyTrip's revenue growth (21.6% year-over-year in Q2 2025) and expanding margins (net margin of 9.7% in LTM 2025) justify some optimism.

However, the stock's forward P/E of 68.72 raises eyebrows. This multiple implies significant growth must materialize to justify current prices. Analysts note that MakeMyTrip's net income fell 56% in 2024 due to rising expenses, a trend that could pressure margins unless revenue growth accelerates.

Earnings Catalysts: Can They Deliver?

MakeMyTrip's Q2 earnings report on October 23 will be critical. Analysts project EPS of $0.46 and revenue of $296.4 million, up 17.9% year-over-year. The company's recent initiatives—such as the relaunch of its MMT Black loyalty program, AI-powered chatbot Myra, and expanded e-Visa services—should drive customer engagement and bookings.

International air ticket revenue, which now accounts for 37% of air sales, is a key growth lever. The expansion into five new international e-Visa destinations and premium airport services could boost high-margin premium travel sales. However, domestic flight supply constraints in India—a major market—pose a risk.

Analyst Sentiment: Bullish but Cautious

Despite the premium valuation, analysts maintain a "Strong Buy" consensus, with an average price target of $127.50 (a 39% upside from June 20's $91.66). This target reflects faith in MakeMyTrip's ability to execute its growth strategy. Yet, recent estimate revisions hint at caution: EPS forecasts for 2025 have been cut from $1.04 to $0.97 over the past 90 days, signaling concerns about margin pressures.

The Zacks Rank #1 ("Strong Buy") adds credibility, but its Earnings ESP of 0.00% suggests limited upside surprise potential. Historically, MakeMyTrip has beaten estimates in three of the last four quarters by an average of 37.6%, so investors will scrutinize whether this streak continues.

Risks to Consider

• Valuation Squeeze: A miss on Q2 earnings could trigger a sell-off, especially with shares trading at 10.7x sales.
• Margin Pressures: Rising costs for technology and marketing may limit profit growth.
• Domestic Supply Constraints: Limited flight capacity in India could cap revenue growth in its core market.

Investment Takeaway

MakeMyTrip's valuation demands strong execution, but its growth drivers—technology upgrades, loyalty programs, and international expansion—are compelling. Investors should treat the Q2 earnings report as a pivotal event: a beat could reaffirm the premium, while a miss might invite a reevaluation. For now, the stock's strong cash flow ($761 million) and low debt (debt/equity of 0.20) provide a safety net.

Recommendation: Buy with a tight stop-loss ahead of earnings. The long-term thesis hinges on sustained margin expansion and market share gains. If Q2 results meet or exceed expectations, the stock could rebound toward its $127.50 target. If not, the premium may come under pressure until growth accelerates.