Trip.com Group Limited (TCOM) on Q3 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by and welcome to the Trip.com 2021 Q3 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, Trip.com IR Director. Please go ahead. Michelle Qi: Thank you, Darcy. Thank you, all. Good morning and good evening. Welcome to Trip.com's 2021 Q3 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. During this call, we will discuss our future outlook and performance, which are forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in Trip.com Group's public filings with the Securities and Exchange Commission. Trip.com Group does not undertake any obligation to update any forward-looking statements, except as required under applicable law. James, Jane, and Cindy will share our strategy and business updates, operating highlights, and financial performance for the third quarter of 2021 as well as an outlook for the fourth quarter of 2021. After the prepared remarks, we will have a Q&A session. With that, I will turn the call over to James. James, please. James Liang: Thank you, Michelle and thank you everyone for joining us on the call today. In the third quarter we were glad to see the world that continues to transition towards normalcy. Thanks to the rapid vaccine rollouts and easing of travel curbs, people are more comfortable with traveling and are able to do more in destinations. The Chinese domestic travel markets have seen recovery take shape and Europe and the United States have reopened their borders to fully vaccinated travelers. These initial progressive packages have helped to facilitate and travel within the continent. We are also happy to see many countries have adopted travel best policies to smoothen out for international travel and tourism. In China, the spread of Delta variant, beginning at the end of July disrupted the summer vacation season and hence suppressed travel momentum in the winter. The vaccination rate in the country continues to raise with the expectation that over 85% of the Chinese population will be fully vaccinated early next year. The high vaccination rates and the national rollout of booster shots will help us build resilience to pandemic challenges. The recent discovery of Omicron variant may have started a new round of global concern and has once again given rise to also some travel restrictions. Pandemic concern continues to be an ongoing issue for consumers and investors alike in the next year. It was believed that many in the face of change is the key to hold on pandemic impacts. We will continue to adopt a new circulation strategy to focus on both, the Chinese domestic and the global travel markets. The has changed these new opportunities changing market conditions. In China domestic markets remain focused on qualifying supply chains to enrich our product offerings to cover more user cases and leveraging our counter strategies attracting younger generations. Our content channel is not only an inspiration for travelers, but it's also a platform of business channel, where business partners can showcase their products and interact with dotcom groups of high quality users. This year, more than 200 million users have used our content. Remarkably 75% of the unique app visitors have developed the habit of browsing our content capital. As the leading one stop travel platform, our content to conduction conversion rate is also higher. Business partners can enjoy monthly conversion rates up to 30% encouraging them to reinforce our cooperation. On the international front, Asia Pacific and Europe will continue to be our key focus. In APAC markets, our global brand Trip.com has been gaining share in markets such as Hong Kong, Singapore, Japan, and South Korea with increasing brand awareness and app usage. During the pandemic, Trip.com swiftly adopted to meet different demands and focused on Staycation by strengthening local hotel brands. In Europe, all of our brands have been closely collaborating throughout the previous quarters, giving a strong boost to Trip.com's product competitiveness in the region. In the long run, Trip.com will continue to enhance it product offering and leverage Skyscanner's strong metrics and strengthening its market presence in Europe. Such local focus, global vision will continue to be our core strategy in coming years. We will remain focused on strengthening the base competitiveness, and will prepare to embrace the global travel revival and tourism boom. We hope to see such inputs start to bear fruit and to be reflected in the performance of our business over the next three to five years. With that, I will turn the call over to Jane for operational highlights. Jane Sun: Thank you, James. Good morning, everyone. I would like to start with a brief overview of our performance in the past quarter and updates on our strategic focuses. In the third quarter, our total net revenue remained stable year-over-year and decreased by 9% quarter-over-quarter, mainly due to natural disasters and the new rounds of infections, which affect multiple provinces in China. We are glad to see the world moving ahead in normalizing international tourism. Yet, the road to global recovery is not without ups and downs. The performance of travel markets in major economies has been diverted, but China's travel market has been frequently interrupted by the resurgences of COVID cases. It has witnessed a strong recovery in July until natural disasters and the Delta variant emerged to slow it down. Industry wise, the hotel occupancy rates and air ticket bookings in Q3 were down by around 30% when compared to the pre-COVID 2019 level for market performances. Nevertheless, our domestic hotel business was able to outpace the market performance by 20% to 25% and our domestic air ticket booking recovery was much higher than the market levels as well. The global market, on the other hand, has been making great progresses in returning to normalcy, especially in Europe and United States. Air ticket bookings in these markets made some major strides towards pre-pandemic levels in the past month. While the global flight volume was still below 2019 level, Trip.com's overall international air ticket booking has increased by around 40% quarter-over-quarter, with air ticket bookings in Europe growing by 170%. Skyscanner also saw air ticket bookings increased by approximately 100% year-over-year, and around 35% quarter-over-quarter. While COVID 19 pandemic has negatively affected the travel industry, there is no doubt the industry will emerge out from the trenches and come back stronger. We hope to see the travel industry take off in mid 2022 as vaccination levels rise in the key markets, and travelers become used to some level of travel restrictions and feel more comfortable booking trips again. Looking beyond 2021, our long-term mission is to pursue the perfect trip for a better world and it has never changed. As James just mentioned, we will continue to stick to our strategy of local focus, global vision and focus on the following areas. First, building strong user cases and make traveling part of our daily lives. As the pandemic and results, and the resulting health and travel measures make people shy away from long distance trips, weekend, regional, and as vacation travel have become more popular and frequent. In Q3, we were glad to see our intra-province hotel booking grew by approximately 35%. And our local hotel bookings grew by more than 60% compared to the same period pre-COVID in 2019. In order to build strong user cases to attract and motivate users, we collaborated with more than 6000 five-star hotels to provide value added hotel packages, which included catering and many other in-hotel services. Such packages contributed around 30% to our sales of these partner hotels. We strive to seize this opportunity to attract young generations and to help users embrace travel as part of their daily lives. In response to addressing the need for inspiration for short haul and the local trips, we continue to make solid progress in our content strategy. The total amount of content published on our platform increased by 100% year-over-year. Compared to Q2, our number of KOLs have sequentially increased by 35%. The amount of users who interacted with our content increased by 20% and the monthly content to transaction conversion rate reached 30% in July. Second, tightening our relationship with business partners by empowering them to optimized customer structure and improved efficiency, not only as an inspiration hub for users, our content channels also serve as the go to platform where suppliers are empowered to improve making efficiencies and gain traction with Trip.com Group's high quality users. As an important part of our content strategy, Star Hub aims to help improve suppliers conversion rate, and info feed to increase their exposure. We have seen the number of the professionally generated content, content exposure and content GMV increases by monthly average of 50% for past consecutive seven months. In order to help expand our partners' customer base, we are also able to or pushing forward with multiple corporate membership programs, where users are entitled to benefit from both parties. There are now more than 13 million co-branded members between Trip.com Group and our hotel partners and this number has grown by about six times since 2019. We also strengthened our partnership with airlines to help them with operating efficiencies, and enhanced our growth in the first and business class bookings. Third, strengthening the synergy among all brands of our group of Trip.com Group to increase our market response to global spaces and strengthening the synergies among our group companies globally. The strengthening of the synergy among our group companies globally has continuously on the goal for the past quarters. Leveraging the strong combined brand awareness and global presence we're able to establish closer relationships with local suppliers and to feel the Skyscanner and Trip.com with improved competitiveness, enhanced product offerings and service reliability. Grasping the opportunity presented by the pandemic, we launched a series of value added services to address our global clientele for user friendliness and flexibility. We believe these will enable us to better respond to the post pandemic travelers evolving demands and further gain market share, a strong local supply chain and bolster the product capabilities will enable Trip.com to better utilize Skyscanner's strong traffic in Europe. Fourth, corporate responsibility. Following up our rural revitalization initiatives, on top of these Trip.com Group countries retreats that were already opened in a business in Q2, two more were opened this quarter. Our facility in any provinces has now grown into a foundation of our Rural Revitalization Academy, co-created with the local government. Through online and offline channels we provide local talent with professionally training and develop skills and contribute to improve the global services quality. On top of the developing rural tourism that the country retreats also help facilitate the sales of the local products, the young affinity as a means to improve local economy and the livelihood. With a strong diverse workforce, Trip.com Group also strives to create an inclusion, inclusive and friendly working environment. With that clear code of conduct to support working mothers and care for pregnant employees, in October, we were happy to receive the Women's Empowerment Principles Award by UN Woman China as recognition of our efforts in promoting gender equality and female empowerment. The travel industry has proven its resilience over the time, from 9/11 to SARS and we definitely weathered the storm of COVID-19 as well. With crisis comes opportunity. Remaining agile in the face of the challenge will help us to seize opportunities and come back stronger and reestablish confidence in travelers and to pursuit of perfect trip for a better world as our mission stated. With that, I will now turn the call over to Cindy. Cindy Wang: Thanks Jane. Good morning everyone. For the third quarter of 2021, Trip.com Group reported net revenue of RMB5.3 billion, representing a 2% decrease year-over-year, and 9% decrease quarter-over-quarter, primarily due to the influence of natural disasters and new round of pandemic outbreak in multiple regions of China. Accommodation reservation revenue for the third quarter of 2021 was RMB2.2 billion, representing 11% decrease year-over-year and 11% decrease quarter-over-quarter recovering to 53% of the 2019 level. This is a net result of steady growth in July, offset it by the disruption of natural disasters and resurgence of COVID cases spreading over multiple provinces beginning at the end of July. Our China domestic hotel bookings have seen high single digit growth year-over-year, while ADR and blended take rates are both affected by the depressed demand. Transportation ticketing revenue for the third quarter of 2021 was RMB1.8 billion, representing a 5% decrease year-over-year and 12% decrease quarter-over-quarter, recovering to 49% of the 2019 level, among which domestic transportations recovery momentum was disrupted by bad -- natural disasters and resurgence of COVID cases in summer, while international air ticket bookings increased by approximately 40% when compared to the previous quarter, mainly contributed by the recovery in Europe. Packaged tour revenue for the third quarter of 2021 was RMB392 million, representing a 20% increase year-over-year and 7% increase quarter-over-quarter, recovering to 24% of the 2019 level. This was contributed by an increase of leisure travel demand in July before the new round of pandemic outbreak. Corporate travel revenue for the third quarter of 2021 was RMB338 million, representing a 20% increase year-over-year and 13% decrease quarter-over-quarter, slightly higher than 2019 level. This segment continues to gain momentum as a result of the expanding user base and improving cross selling from transportation to accommodation. Gross margin was 77% for the third quarter of 2021 decreasing from 79% in the previous quarter, mainly due to reduce the top line recovery interrupted by new wave of infections. Excluding share based compensation charges, our adjusted operating expenses decreased by 32% compared to the same period in 2019. Adjusted product development expenses for the third quarter increased by 20% from the same period in 2020, and increased by 2% from the previous quarter, mainly reflecting the general increase in salary of product development personnel. We continued to run lean and maintain a stable headcount in the in the in the teams. It is a saving of 19% when compared to the same period in 2019. Adjusted sales and marketing expenses for the third quarter decreased by 10% from the previous quarter, as we swiftly adapt to the changing market conditions and followed a more prudent spending protocol in response to the uncertainty brought about by the pandemic. This reflects a saving of 49% when compared to the same period in 2019. Adjusted G&A expenses for the third quarter decreased by 5% from the previous quarter. It also increased by 83% year-over-year primarily due to a reversal of bad debt provision in the third quarter of 2020 for the company's travel suppliers and it is a saving of 20% when compared to the same period in 2019. Adjusted EBITDA for the third quarter was RMB537 million compared to RMB916 million in previous quarter. Adjusted EBITDA margin was 10% for the third quarter compared to 16% in the previous quarter. Diluted loss per ordinary share and per ADS were RMB1.32 or U.S. $0.20 for the third quarter. Excluding share-based compensation charges and fair value changes of equity securities investments and exchangeable senior notes, non-GAAP diluted earnings per ordinary share and per ADS where RMB0.81, or U.S. $0.13 for the third quarter. As of September 30, 2021, the balance of cash and cash equivalents restricted cash, short-term investments held to maturity term deposits and financial product was RMB67.6 billion or U.S. $10.5 billion. We redeemed early U.S. $500 million of the 2025 Booking and Hillhouse Notes in the quarter and another U.S. $500 million of the same convertible notes in December, reducing a potential dilution of 14.6 million ordinary shares. Turning to the fourth quarter of 2021, we would like to share some color of our business. In China, during the National Day holiday our domestic hotel reservation reached double-digit growth during the beginning of the holiday, while transportation reservations close to the pre-COVID level. Multiple rounds of COVID cases that began in mid October and spread to more than 20 provinces largely impacted entire China domestic travel industry. In November, the industry level hotel occupancy rate was down by 30% to 40% and air tickets passengers down 50% to 60%, but compared with the same period in 2019. Trip.com Group was also affected, but we continue to lead market performance by at least 10% to 20%. Outbound travel remained rather muted in current conditions, while outside of China, the recovery momentum in Europe and the U.S. continues to carry over to October, with increased freight segment benefiting from the relaxation of travel restrictions and vaccine rollout. The path to global recovery is set, but not without ups and downs. We will continue to be adaptive and responsive to changing market conditions and be flexible and agile to seize opportunities to create value for our users and partners. With that, operator, please open the line for questions. Operator: Thank you. Your first question comes from Thomas Chong from Jefferies. Please go ahead. Thomas Chong: Hi, James, Jane, Cindy, good morning. Thanks for taking my questions. Can you share some color about the company's spend for the international business. How do you think about the pace of recovery in open travel as the restrictions are lift? Thank you. James Liang: In the recent months, many countries have adopted broader reopening plans to relax travel restrictions. More and more people are back on the road and travel further. Though some countries have tightened restrictions recently due to the Omicron variant, the temporary turbulence will not change the ultimate trend of travel recovery. Under normal conditions, we may see China gradually relax inbound and outbound travel policies in the second half of 2022. The process reopening is expected to begin with Mainland China reconnecting with Hong Kong and then international openings with other international markets. The pace is largely depending on the relaxation rates and the pandemic control capability in related markets. We'll continue to enhance our product and service competitiveness in the domestic market and we're fully prepared for the recovery of international markets. In the past two years Trip.com Group has demonstrated its resilience by leading the industry recovery despite COVID headwinds, making us a stronger company. We believe that our local focus, global vision strategy will revive our sustainable growth in the long run. Operator: Thank you. Your next question comes from James Lee from Mizuho. Please go ahead. James Lee: Great. Thanks for taking my questions. Two quick ones here. Hi, Jane. How should we think about maybe the travel activity heading into Chinese New Year that being first, and second for, I think outbound travel to Hong Kong, any early read that you're seeing on consumer demand and behavior there? Thank you. Jane Sun: Yes, thanks, James. The opening up of Macau really provides a very good leading indicator for further consideration of Hong Kong. So we were just in Macau, holding our Global Partnership Committee and the control of the virus over there is being conducted very well. So that provides everyone in the travel industry some experience as to what will happen if Hong Kong opens up. So we are very much looking forward to a very good control of the virus in Hong Kong continuously. And with that condition, there might be good consideration for opening up of Hong Kong. And that also connects to our plan for the Chinese New Year. Historically, this Hong Kong is a very popular travel destination for Chinese New Year as people try to go visit different cities and doing some shopping in Hong Kong. So hopefully, there will be enough supporting evidence as to the well controlled environment, both in Mainland China and in Hong Kong, which gives us the support to further consideration of opening up Hong Kong in addition to Macau. Thank you. James Lee: Great, thank you. Jane Sun: Thanks. Operator: Thank you. Your next question comes from Brian Gong from Citi. Please go ahead. Brian Gong: Thanks James, Jane, Cindy and Michelle for taking my question. So my question is about domestic travel expectation. So how does management see the travel performance outlook in first quarter 2021 and next year or first quarter next year with some local government right now encouraging people not to travel across regions and Winter Olympics held in March, should we still expect domestic performance to be dragged by travel restriction, and also with a low base in the second half of this year should we see more normalized year-on-year growth in the second half next year for domestic market? Thank you. Cindy Wang: Yes, so what we have seen for the domestic travel is four S, by saying four S, we have seen people are paying more attention to safety. So we encourage our suppliers to make sure they have very good safety measures such as providing hand sanitizers, masks to our travelers. The second S is most people prefer to travel with much smaller groups rather than big groups. So, normally our customized tool is selling very well. Our customers prefer to hire car and to ride with family van to take their family around. The third S is with a much short booking results because of the virus control a lot of time we will get notifications from different destinations. So, the booking window we have seen is much shorter. And the last one of the four S is short distance. So what we have seen is people prefer to travel nearby their home town, anywhere within the 300 kilo becomes the radius. People feel more comfortable to travel to. And also we have seen young generation prefer to travel much more. So we have seen the young spenders who were born in 90s and Generation Z travel quite a lot. So these are the trends we have seen so far. Again, I think a lot of it will be depending on how well the virus is being controlled during the first quarter and the second quarter. However, these demands are not disappearing from our data of the search. Customers pent up demand is accumulating and very strong just as what we saw in May holiday this year, the search of the demand is very strong. So we are very hopeful that the vaccination rate will be continuously increasing, the measures of the virus control will prove to be effective, and then gradually the market will increase. So your assessment, the second half of 2022 will be stronger than the first half we very much hope so. Thank you. Operator: Thank you. Your next question comes from Ronald Keung from Goldman Sachs. Please go ahead. Ronald Keung: Thank you. Thank you, James, Jane, Cindy and Michelle. My question is more on, if the recent travel patterns that we saw in recent months last for longer and with Omicron and governments dynamics zero COVID strategies, then how does management see the trajectory for domestic and international travel in 2022 if the recent trends last longer, and how will we plan our costs accordingly, and implications to either cash flows or margins in the next one to two years? Thank you. Jane Sun: Thank you. Yes, thank you, Ron. Our margin actually decided by both the top line as well as the cost to control, our cost to control on the top line on the revenue side. Of course, we are in the travel industry so our performance will be pretty much decided by the industry growth. However, as always, we will do our best to continuously outpace the industry growth for example, in the third quarter, this year, we outpace the 10% to 20% at least for different segments compared with the industry growth in the travel industry. On the cost side, we will continuously to weather the COVID to weather the storm, we have to have a very disciplined cost policies cost structures to weather the storm. Firstly, we have very strong cash position. At the end of Q3, we have about U.S. $10.5 billion in the cash balance, which probably is the best among one of the best in the travel industry. Then secondly, on the cost side, our total adjusted costs and operating expenses actually decreased by more than 35% in Q3 compared with before COVID level, thanks to our very largely flexible cost expenses structure, and as well as efficient operating management. During the past few quarters, we streamlined our operations across different business lines, in addition to certain adjustments related to the COVID. And in addition, our improvements on the content cross-selling and technology have further lifted our marketing efficiencies. In terms of the cost trend, going forward we will expect a very modest increase in the personnel expenses only in our international markets. And for the domestic markets, we expect our total headcount will be pretty much stable, especially for our core businesses. But we need to add some investment just to capture the pent-up demand that has already been seen in the international market, especially in the Europe market. On the sales, marketing expenses, we will continuously to adapt -- adopt and our ROI driven strategy. And we will have very disciplined policies in terms of sales and marketing spending, both for the domestic China market as well as for the international market. Michelle Qi: Thank you. Operator: Thank you. Your next question comes from Alex Yao from JPMorgan. Please go ahead. Alex Yao: Hi, good morning management. Thank you for taking my question. I have a question on the investment activities. So in light of the potential we opened in China, and also more regions and the markets in the rest of the world, are you guys contemplating any additional and new investments activity to capture those are reopening opportunities? Thank you. Jane Sun: Yes, so thanks, Alex. In terms of investment strategy, historically we're very disciplined. There are three principles we adhere to. First of all, it needs to be very closely related to our core competence. And secondly, we need to really look for the companies that is number one, or number two in their verticals and certainly the valuation needs to be very reasonable. So historically, we are very, very selective and very careful in terms of our investment. However, in terms of our organic investments in our core competence for the long-term investment, such as technology, and services and products, we're taking advantage of this slow season to make sure we focus on the projects, which were strengthening our competitiveness in the long-term. So with limited resources, we're also prioritizing our internal projects to make sure we give the priority for the projects which will extend our competence in the long run. Thank you. Operator: Thank you. There are no further questions at this time. I'll now hand back for closing remarks. Michelle Qi: Thank you everyone for joining us today. You can find the transcript and webcast of today's call on investors.trip.com. We look forward to speaking with you on our fourth quarter 2021 earnings calls. Thank you and have a good day. Jane Sun: Thank you very much. Cindy Wang: Thank you. Operator: Thank you. 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.
