Trip.com Group Limited (TCOM) on Q1 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by and welcome to the Trip.com Group 2021 Q1 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I would now like to hand the conference over to Michelle Qi, Senior IR Director of Trip.com Group. Please go ahead. Michelle Qi: Thank you. Good morning and welcome to Trip.com Group's 2021 Q1 earnings conference call. Joining me today on the call are Mr. James Liang, Executive Chairman of the Board; Ms. Jane Sun, Chief Executive Officer; and Ms. Cindy Wang, Chief Financial Officer. James Liang: Thank you, Michelle. Thank you everyone for joining us on the call today. Due to China's successful containment of the pandemic, the recovery of China's domestic travel market continues to show momentum. The border is still shut; many have turned to domestic travel to high-quality scenic spots and destinations. During the May holiday, approximately 230 million trips were made by tourists domestically, representing a 3% increase compared to the same period in 2019 before COVID, setting a new all-time high for the holiday. On our platform long-distance travel across provinces in Mainland China has made a full recovery and short-distance local travel continues its strongest growth trajectory. Trip.com Group submission is to pursue the perfect trip for a better world. Throughout the past two decades, we have continuously exploring and innovating to further improve our offerings. We have established a leading global one-stop travel platform where users can easily define comprehensive products with reliable services and guarantees, and differentiated the travel content, all reachable within a few taps of our mobile application. Following the strong recovery of China domestic travel market, we have successfully launched our second listing -- secondary listing in Hong Kong in April. This marks a milestone in our development from which we embarked our new journey. Currently, our market share in China's domestic travel market is only in mid-teens, while global market share is still in the low single-digits. We are excited for the potential of our growth. Jane Sun: Thanks, James. Good morning, everyone. I would like to first quickly walk through our Q1 results and then touch base on our post-pandemic growth drivers and future opportunities. First, Q1 overall highlights. Due to the travel restrictions in Mainland, China to contain virus in January and February of 2021 around Chinese New Year, our top line decreased by 13% year-over-year and about 50% as compared to the same period in 2019. Despite such challenges China's domestic travel market rebounded strongly in March and with even great momentum in April and May. Both hotel and air ticket have grown strongly. Cross-sells between air to hotel products in Q1 increased significantly compared to the same period in 2019. We are also delighted to see revenue from other business lines in Q1 exceeded that the same period in 2019. Revenue from corporate tower management has completely recovered compared to 2019 pre-COVID. And new initiatives such as travel financing services and domestic travel advertisement have both delivered strong results. Cindy Wang: Thanks, Jane. Good morning, everyone. To avoid comparing with the same period in 2020, when the pandemic outbreak first appeared, I will in fact compare our – performance in the first quarter with the same period in 2019 and the fourth quarter of 2020. For the first quarter of 2021, Trip.com Group reported net revenue of RMB 4.1 billion, representing a 50% decrease from the same period in 2019. The first half of the quarter was significantly impacted by the resurgence of COVID cases in China and the travel restrictions that followed. However, our domestic business showed strong resilience and quickly rebounded after the Chinese New Year holiday. Both our domestic hotel and air business have fully recovered to pre-COVID level since early March and achieved double-digit growth during the month compared with the same period in 2019. Revenues from corporate travel business grew 6% in Q1 compared with 2019, mainly driven by the expansion of its client pool and increase of cross-selling to accommodation products. Revenues from other business grew 17% in Q1 compared with 2019, thanks to the fast development of our new initiatives, such as travel financing services and domestic travel advertisement business. Gross margin was 75% for the first quarter of 2021, decreased from 82% for the previous quarter, largely due to the travel restrictions at the outset of 2021. Excluding share-based compensation charges, our adjusted operating expenses decreased by 30%, compared with the same period in 2019 and were flattish compared to the previous quarter. Adjusted product development expenses for the first quarter increased by 9% to RMB2.1 billion from the previous quarter, primarily due to fluctuation in expenses related to product development personnel. Total headcount in our product and development team is largely stable, and the average salary increased modestly as we entered into 2021. Adjusted sales and marketing expenses for the first quarter decreased by 22% to RMB930 million from the previous quarter, mainly due to the decrease in expenses related to sales and marketing promotion activities in response to the decreased travel demand in the quarter. Adjusted G&A expenses for the first quarter increased by 20% from the previous quarter mainly due to the fluctuations in the allowance for the expected credit loss. Following the common market practice, we start to disclose adjusted EBITDA from this quarter. The difference between adjusted EBITDA and non-GAAP operating income represents the depreciation and amortization expenses, which is available on our 6-K form. Adjusted EBITDA was RMB -- was negative RMB216 million and adjusted EBITDA margin was negative 5% for the first quarter of 2021. Operator: Thank you. Your first question comes from Alex Poon with Morgan Stanley. Alex Poon: Thanks management for taking my questions. Congrats on the very strong results and rebound in travel demand. My question is regarding the resurgence of COVID-19 globally. Travel -- international travel remains uncertain. So how will Trip.com prepare the strategy and focus in this environment? Thank you very much. James Liang: Thanks for the question. We have full confidence in the complete resumption of international travel. We have already seen the promising recovery of travel in some countries and regions with widespread vaccination rollout. Across all markets we have seen domestic travel market rebound and gradually make up the loss of cross-border travel. Recently, our total hotel bookings have reached pre-COVID level, while prices remain under pressure. In Q1 overseas hotel bookings by non-Chinese customers on our Trip.com platform have already recovered to the pre-pandemic level. Our teams are utilizing this time to enhance our fundamentals in price product, service and app user experience for overseas users. With that will be best positioned to capture the pent-up travel demand when international travel recovers. Jane Sun: Thank you. Operator: Your next question comes from Ronald Keung with Goldman Sachs. Ronald Keung: Thank you, Jane, James, Cindy and Michelle. I guess following on that recovery part could you -- could management share just how we see the forward say a few quarters and maybe into 2022, just how are we expecting that international recovery path may be if not quantitative maybe qualitatively that recovery path? And how would we plan our sales and marketing or strategies on our spending alongside that eventual international recovery path? And are we thinking about how domestic will shift or domestic strength that we see now actually maintain, while international will be incremental kind of recovering with that expectation? Thank you. Jane Sun: Thanks for your question. We look at our business in three segments. The first one is domestic travel. The second one is for the areas outside of China, the domestic travel within each respective countries. The third one is cross-border travel. So first of all, for domestic travel with China we have full confidence that our government have very effective control procedures to make sure Mainland China's economy will grow strongly. And normally when the economy is growing strongly our travel market will outpace the GDP growth in that market. And we will work very hard to serve our customers to capitalize on the strong momentum. So that's the first thing within domestic travel for Mainland China. The second thing is outside of China, we also have seen a strong recovery in each respective markets we are targeting at. So based on the numbers we are looking at for the most recent months, these -- the domestic travel in the respective areas outside of Mainland China have already recovered to pre-COVID level. So we have very strong confidence that applying for whatever worked in the Mainland China will also be capitalized on some of the markets we are targeting at. The third one is cross-border trouble. That is a little bit -- it takes more coordination between nations. But we are encouraged by the development of the vaccination. I think each government is pushing very hard to make sure the people within each country are well protected. So for what we have seen UK, Europe and the United States are moving very fast in that front. And also Asia, most of the country have demonstrated their ability to control and also control and handle these kind of crisis quite well. So we are hopeful that Asia, Europe, America gradually will be opening up. And with more vaccination is taken hopefully the passport will indicate the passenger's information. And therefore, gradually we will be able to capitalize on the type of demand for cross-border transactions as well. Thank you. Operator: Your next question comes from Alex Yao with JPMorgan. Alex Yao : Thank you, management for taking my question. I would like to follow up with Ronald's question, but from a slightly different angle. So I think ultimately COVID will be behind us, it could be the end of this year, it could be mid of next year. When we enter into the post-COVID stage, how do you think about the more normalized growth rate in the next couple of years? What are the new revenue opportunities you are seeing post COVID as a result of perhaps a consumer behavior change or business behavior change? Thank you. Jane Sun: Yes. I think we are all very excited to wait for the pass of the COVID. From our search results on our sites, the pent-up demand is very strong. So we are confident eventually the scientists around the world will come up with very strong method to contain this virus. And governments also through the past year have accumulated a lot of experience to make sure that going forward the virus will be well contained. And our team works very hard to accumulate our knowledge and experience to handle different situations. So, within our domestic travel, there are also a lot of opportunity. Our market share still is quite low. It's in the teens. In 2019, our market share is around 13%. There are still a lot of address the market that we have not tapped into. So, for example, our content-driven strategy is a new area. The market will grow quite nicely in the next three to five years, and if we can address and take about 3% share to 5% share, that's quite significant already. Secondly, we also saw the short-haul travel which is serving as an alternative when people are contained within their own borders. And thirdly, corporate travel as we discussed is growing very strongly. Traditionally, it's adjusted by the other channels, but we ought to use very good services to address the customers who need to travel from cities to cities and frequently on the road. So with our strength in hotel, air and the other area, we will be able to help the customers who travel so frequently around China. And fourth also, the cross-sell opportunity on our wind stop platform represents a good opportunity to make sure our customers' needs are addressed very nicely rather than having our customers to searching -- to search all around the website to find the right product. We ought to provide better services for them, when we use our technology and one-stop shopping platform to provide the best service for our customers. And these new initiatives are mainly centered around domestic travel for China. And in addition, I think the cross-border travel, inbound travel and for the customers around the world, we also add another layer of the growth. And our team is working very hard with our global team, just to make sure that our strength in the Mainland China eventually will be duplicated in the global places. So we are excited for the future growth. Thank you. Operator: Your next question comes from Thomas Chong with Jefferies. Thomas Chong: Hi, good morning. Thanks management for taking my question. I have a question relating to the expense side. Given that we have done a lot of work to optimize the cost, how should we think about the trend in expenses going forward after COVID? Thank you. Jane Sun: Thank you, Thomas. Yes, thanks to our largely flexible cost and expenses structure and efficient operating management. During past year, we actually further streamlined our operations across business lines in addition to certain adjustments related to COVID. Our improvement on content and cross-selling going forward will further help us to lift our marketing efficiency. We expect -- in terms of the cost trend in the year 2021, we expect comparatively modest increase in personnel-related expenses. And sales and marketing expenses are largely discretional and adjusted in accordance with our business recovery. And we will continue to adopt an ROI-driven strategy. Furthermore, we believe our improvement on content and cross-selling will help us to improve our marketing efficiency in general. But at the same time, we will also reserve certain budgets in the short term to development -- to develop content ecosystem and to prepare for recovery and growth of the international market. Thank you. Operator: Thank you. Your next question comes from James Lee with Mizuho. James Lee: Great. Thanks for taking my questions. My question is regarding advertising opportunity. I was hoping maybe, Jane, you always spoke about live streaming and StarHub. They all sound very interesting. And can we maybe get an early sense about understanding the friction that you're experiencing with advertiser when they try to adopt the new content platform and how you plan to resolve it specifically? And also, maybe early learnings from consumers, should we have any? And what do they like about your new content platform? And what needs to improve? And lastly, maybe over longer term, can you talk about what kind of critical mass that you need in terms of users and engagement and that will lead to ultimately improve monetization. Thanks so much. Jane Sun: Sure. From a long-term perspective, the content and the -- content and also advertisement market currently is about CNY 90 billion market. And by 2025, the market size is grow to be -- is expected to be around 140% -- CNY 140 billion. And our target is that, if we work very hard to address about 3% to 5% of the total market that can be quite significant for our top line and bottom line as well. Secondly, the strength of our platform is that, the quality of our customers is very strong. And they're looking for inspiration when they decide where to go, particularly during the holiday season, summer vacations, Chinese New Years, et cetera. So when we post our content onto our platform, we're already seeing the users doubled for that channel. And also the same for the time spent in this channel also doubled significantly in these channels. So that gives us a very strong indication that customer needs the content. And we will also offer a very customized match between the customers, what they're looking for; to be suitable for their family need, for their interest. Thirdly, with the strong customer interest as well as their spending power, the areas, the hotels, travel destinations and attractions, if we do a very good analysis we also offer the best alternatives for customers to look at. So that also is strength for our platform. We have seen very strong conversion on our platform, when we post the relative and very carefully analyzed matching for our customers. So these are the strengths for our platform. And of course, we only started this system one month ago. The momentum is strong. But it takes our team for our strong execution and to make sure the product is suitable for both, our customers and partners. But we are confident as soon as we keep up with our strong execution, we'll be able to offer the best product for both, of our consumers as well as the partners. Thank you. Operator: Our next question comes from Joyce Ju with Bank of America. Joyce Ju: Good morning Jane, James, Cindy and Michelle, congrats on the very strong results this quarter. And thanks for taking my questions. My question is related to government's recent antitrust push. We have seen a couple of segment leaders, recently being inspected. And also some of them even pay the penalties antitrust movement. So I just want to ask like, if we have been -- we had related like risk? And if we have been in any communications with the regulators in this perspective, given, I think, the antitrust looks good at the very beginning. There are a couple areas of expectations like, they actually include like, price discrimination like, monopoly power of the marketplaces. Just try to understand how we actually avoid the -- into a situation like being fined or like get penalty from this? Thank you. Jane Sun: Thank you. We fully support our government, for their efforts to create a healthy and sustainable growth market. Our belief is that, the market, if we can create a market that is healthy and sustainable, we -- the industry will grow in a very healthy manner. Secondly, our market share is quite small still. The market share for 2019 is around 13%. There -- the travel industry is fast growing. We need quality service provider, to address our customers' needs. So we'll work very hard with the government, with our partners to make sure our customers' demand is very well addressed. Thank you. Operator: Our next question comes from Tian Hou with TH Capital. Tian Hou: Good morning management. Thanks for taking my question. I have two quick questions. On the income statement, for the corporate travel, so I saw like, a year-on-year 100% growth and it's really outstanding. So I really want to understand, what are the drivers behind the 100% year-on-year growth? And what could be the future growth in this line, at least the outlook for that? The second one is for other business. So it is actually showing the year-on-year positive returns. So can management give some color to tell us, what are within the others? And what items within the others are driving force for this part of revenue to grow that fast? That's my two questions. Thank you. Jane Sun: Thank you, Tian. Ctrip is always the leader in – especially in the business travel space. Of course, the 100% growth, the first reason is the lower – comparatively low base of last year because last – the first quarter of last year is the outbreak of the pandemic. Basically there is a very low traffic, especially for the business travels. Therefore, we had 100% growth. And secondly, it actually reflects the fact that once there is a pandemic or the – or any emergencies, a market leader will always consolidate or have growing our market share very quickly. This also reflected in our high growth in the business travel, especially the corporate travel. And the third reason – and – our hotel business in the corporate travel grow very fast significantly, firstly because we have a very competitive pricing or competitive product offering to serve our corporate travel needs; and secondly, we also successfully cross-sell hotel product from the air business, from the air customers from the corporate travel. These are the three reasons, why you see a very strong growth in the corporate travel. And the second question, the others basically is the reflect of the market value adjustment for the available-for-sale investments. The first – actually this basically reflects the brand transit of the market pickup for the first quarter. All our investment are classified as available-for-sale. They have to do re-evaluations on a quarterly basis. So compared with the last year – fourth quarter last year, all the market pricing grow significantly. This is the reason why we had a one-time gain on this category. Operator: Your next question comes from Brian Gong with Citi. Brian Gong: Thanks management for taking my question. Congratulations on the solid results and the recovery. So with the strong recovery of the massive travel, management's expectation for following quarters by different segments, especially for upcoming summer break and the Golden Week, National Day. Thank you. Jane Sun: Yes the Golden Week holiday is very strong. As we discussed, the pent-up demand have driven the growth. As previously discussed, the volume growth for the hotel is more than -- it's a 3-digit growth for year-over-year. For 2019, it's also grew more than 50% year-over-year. For air ticket, the growth is also 3 digits compared to the last year. But also for the next year, it's -- for the 2019, it's more than 30% year-over-year growth. For the Q2 number, I will turn it to Cindy for highlights. Cindy Wang: Yes. We will not provide quarterly guidance anymore in order to comply with the Hong Kong Stock Exchange regulations, but we would like to share some recent colors with our investors. For the quarter-to-date, our total revenue was up more than 80% year-over-year, driven by the strong domestic travel recoveries. But at the same time, the international revenues remain -- still remain under pressure. So compared to 2019, both our domestic hotel and air ticket reservations grew more than 20% compared quarter-to-date. Specifically, during the past Labor Day holiday, our total domestic reservations grew by more than 270% year-over-year and 2019, among which domestic hotel and air reservations were up by more than 50% and 30%, respectively, compared with 2019. The faster recovery of our domestic China travel will gradually and fully make up the loss of outbound business. Recently, our total hotel reservations have returned to pre-COVID level, but the price is still under some pressure. Thank you. Operator: That does conclude our question-and-answer session. I'll now hand back to Michelle Qi for closing remarks. Michelle Qi: Thank you. Thank you, everyone, for joining us today. You can find the transcript and webcast update call on investors.trip.com. We look forward to speaking with you on our second quarter 2021 earnings call. Thank you, and have a good day. Jane Sun: Thank you very much. Cindy Wang: Thank you. James Liang: Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Trip.com Reiterated as Bernstein’s Top Pick Despite Macro Fears
Bernstein SocGen Group reaffirmed its Outperform rating on Trip.com (NASDAQ:TCOM), maintaining a $75 price target and naming it the firm’s top pick within its coverage universe. Analysts believe the current market valuation, hovering around 13 times forward earnings, significantly underestimates the company’s potential—even when factoring in conservative growth assumptions.
While macroeconomic headwinds remain a concern, Bernstein sees Trip.com as well-positioned to weather turbulence in the travel sector. In a modeled scenario of a 1% GDP decline, the firm expects a moderate impact on the company’s performance, with outbound travel dipping by 5% and hotel growth slowing by 2% due to consumer downtrading. However, analysts argue that a shift toward more affordable domestic travel could largely offset international softness, keeping overall revenue growth resilient—dipping only slightly from 16% to 14% for the full year.
Bernstein also compared Trip.com’s risk-reward profile to peers. Tencent Music Entertainment (TME) is viewed as a steady performer with stable earnings, though its valuation is already aligned with its current earnings trajectory. Baidu, on the other hand, is seen as more vulnerable, with its AI monetization efforts potentially derailed by greater exposure to macroeconomic volatility.
In contrast, Trip.com’s strong domestic market, diversified travel offerings, and potential to benefit from travel pattern shifts reinforce its appeal. With a compelling valuation and manageable risk factors, Bernstein continues to see substantial upside for the stock.
Jefferies Stays Bullish on Trip.com, Citing Strong Travel Trends and AI Upside
Jefferies reaffirmed its Buy rating and $77 price target on Trip.com Group (NASDAQ:TCOM), expressing confidence in the company’s ability to deliver on expectations for the current quarter and beyond.
Jefferies sees robust domestic demand driving growth in hotel bookings and air ticketing, with volume expansion as the primary catalyst. Outbound travel trends also continue to gain momentum, as more travelers extend their range, boosting international activity on the platform.
Trip.com is also expected to benefit from its accelerated adoption of artificial intelligence, which is enhancing both user experience and operational efficiency. Jefferies believes the integration of AI tools will play a key role in driving cost savings and increasing engagement.
Trip.com Group Limited's (NASDAQ:TCOM) Earnings Overview
Trip.com Group Limited, listed on NASDAQ as TCOM, is a leading travel service provider known for its comprehensive travel offerings. The company operates in a competitive landscape, with key players like Expedia and Booking Holdings. TCOM's recent financial performance highlights its resilience and strategic focus on growth, particularly in its international business segments.
On February 24, 2025, TCOM reported earnings per share of $0.67, exceeding the estimated $0.52. This performance reflects the company's strong operational execution and market positioning. TCOM's actual revenue of approximately $1.7 billion exceeding expected 1.69 billion.
The company's international business segments have shown significant growth, with outbound hotel and air ticket bookings surpassing 120% of pre-COVID levels from 2019. This growth underscores the travel market's resilience, as highlighted by Executive Chairman James Liang, who attributes it to travelers' increasing desire for exploration and cultural experiences.
TCOM's strategic investments in AI and inbound travel promotion aim to drive innovation and enhance the travel experience. CEO Jane Sun expressed confidence in the company's strong performance across market segments and its favorable market outlook, positioning TCOM for continued growth and success in the industry.
Ahead of the earnings call, TCOM shares rose by 1.4%, closing at $67.02. Benchmark analyst Fawne Jiang reiterated a Buy rating with a price target of $80, reflecting confidence in the company's future prospects. TCOM's financial metrics, such as a P/E ratio of 19.35 and a debt-to-equity ratio of 0.33, indicate a solid market valuation and moderate debt level, supporting its growth trajectory.
Trip.com Group Limited (NASDAQ:TCOM) Sees Optimistic Price Target and Strong Q3 Earnings
- Trip.com Group Limited (NASDAQ:TCOM) received a bullish price target from CFRA, suggesting a significant upside.
- The company reported earnings of $1.25 per share for Q3 2024, beating estimates and showing year-over-year growth.
- Trip.com's international business segments have rebounded strongly, with outbound hotel and air reservations surpassing pre-COVID levels.
Trip.com Group Limited (NASDAQ:TCOM) is a leading travel service provider, offering a wide range of travel-related services including hotel reservations, transportation ticketing, packaged tours, and corporate travel management. The company operates globally, with a strong presence in the Chinese market. It competes with other major players in the travel industry such as Expedia and Booking Holdings.
On November 19, 2024, Siti Salikin from CFRA set a price target of $80 for TCOM, suggesting a potential price increase of approximately 91.02% from its then-current price of $41.88. This optimistic outlook comes on the heels of Trip.com's impressive Q3 2024 earnings report, which was discussed in a recent earnings call attended by key company figures and financial analysts from major firms.
During the Q3 2024 earnings call, Trip.com reported earnings of $1.25 per share, surpassing the Zacks Consensus Estimate of $0.91 per share. This marks an improvement from the $1 per share recorded in the same quarter last year. The company's net revenue for the third quarter increased by 16% compared to the previous year, highlighting its strong financial performance.
Trip.com has seen significant growth in its international business segments, with outbound hotel and air reservations reaching approximately 120% of pre-COVID levels from the same period in 2019. Additionally, air ticket and hotel reservations through its international online travel agency brand surged by over 60% year-over-year, showcasing the company's successful expansion efforts.
The company's net income for the quarter was reported at RMB6.8 billion, or $970 million, up from RMB4.6 billion in the same period of 2023. The adjusted EBITDA for the third quarter was RMB5.7 billion, or $808 million, showing an improvement from RMB4.6 billion in the previous year. As of now, TCOM's stock price is $62.74, with a market capitalization of approximately $40.41 billion.
Trip.com Group Limited (NASDAQ:TCOM) Sees Positive Analyst Sentiment and Stock Performance
- Analyst price target for NASDAQ:TCOM has increased from $69.49 a year ago to $85 last month, indicating growing confidence in the company's prospects.
- Recent upgrade to a Zacks Rank #1 (Strong Buy) reflects increased optimism about Trip.com's earnings potential and its position in the travel industry.
- The stock's performance soared by 8.1% during the last trading session, suggesting strong investor interest and potential for continued strength.
Trip.com Group Limited (NASDAQ:TCOM) is a prominent player in the travel service industry, operating under well-known brands such as Ctrip, Qunar, Trip.com, and Skyscanner. The company offers a wide range of travel services, including accommodation reservations, transportation ticketing, packaged tours, and corporate travel management. As a key player in the expanding Chinese travel market, Trip.com is well-positioned to capitalize on the industry's growth.
Over the past year, the consensus price target for TCOM has seen a notable shift, reflecting changing analyst sentiment and market conditions. Last month, the average price target was $85, indicating a positive outlook from analysts. This suggests expectations for the stock to perform well in the near term, as highlighted by the recent upgrade to a Zacks Rank #1 (Strong Buy). This upgrade indicates increased optimism regarding the company's earnings potential.
Three months ago, the average price target for TCOM was $73.68, showing a significant increase over the past quarter. This suggests that analysts have become more optimistic about the company's prospects, likely due to the robust growth momentum in the travel industry. The recovery in tourism following the COVID-19 pandemic has bolstered Trip.com's performance, contributing to the upward trend in the price target.
A year ago, the average price target stood at $69.49, indicating a growing confidence in Trip.com Group Limited's business model and market position. Despite the challenges posed by the pandemic, the company has demonstrated resilience and adaptability, leading to increased analyst confidence. The recent surge in Trip.com's share price, soaring by 8.1% during the last trading session, further reflects strong investor interest and potential for continued strength in the stock's performance. Trip.com's stock is considered slightly undervalued, providing a margin of safety for investors.
Trip.com Shares Surge 10% After Reporting Strong Q2 Earnings
Trip.com Group (NASDAQ:TCOM) saw its shares surge around 10% intra-day today after reporting stronger-than-expected second-quarter results for fiscal 2024. The travel service provider posted earnings per share of RMB7.25, surpassing Street estimates of RMB5.23, and revenue of RMB12.79 billion, slightly ahead of the consensus forecast of RMB12.76 billion.
Accommodation reservation revenue increased 20% year-over-year to RMB5.14 billion, while packaged-tour revenue soared 42% year-over-year to RMB1.03 billion.
Although transportation ticketing revenue came in slightly below estimates, the company attributed its overall growth to strong cross-border travel demand and highlighted future plans to harness AI for further innovation in the travel sector.
Morgan Stanley Remains Bullish on Trip.com
Morgan Stanley analysts reaffirmed their Overweight rating and a $64 price target for Trip.com Group (NASDAQ:TCOM), noting that the valuation is more appealing in the short term following the recent drop.
After the Q1/24 results, the company's stock fell more than 10%, mirroring the decline following Q4/23 results. Upcoming events like the Dragon Boat Festival (June 8-10) and the summer holiday season are expected to be catalysts. Domestic business year-over-year growth slowed in Q2/24 due to weaker hotel pricing and a one-time adjustment in air revenue/ticketing in late Q3/23. These factors are expected to normalize by Q4/24, potentially leading to accelerated growth in Q4 and bolstering market confidence in sustained domestic growth for 2025.
Outbound travel is anticipated to include more long-haul trips in Q3/24, which should boost prices for air travel and hotels during the summer. The current valuation is attractive at 15x 2024 estimated P/E and 12x 2025 estimated P/E, with projected profit growth of 28% in 2024 and 21% in 2025, corresponding to PEG ratios of 0.5x and 0.6x.
