Trip.com Earnings: Raise Fair Value Estimate by 15%; Robust Growth Continues Despite Macro Weakness

We raise our fair value estimate for Trip.com by 15% to $60 per share from $52 after it reported third-quarter revenue of CNY 15.9 billion, representing a 16% year-on-year increase. While its revenue was in line with our estimate, its adjusted operating margin of 31.5% was 220 basis points higher than our forecast, and we believe the company is likely to continue its margin expansion in 2025 due to operating leverage, which is reflected in our valuation revision. Trip.com’s operating expenses saw lower-than-expected marketing and fixed costs on its platform, and we increase our terminal year operating margin estimate by 270 basis points in 2028. Although we are encouraged by Trip.com’s robust growth and margin expansion, we think shares are fairly valued now despite our new assumptions, as they have risen 25% since China’s stimulus announcement on Sept. 24. However, we believe smaller peer Tongcheng Travel still has an attractive upside as investors overlooked it while the focus was more on Trip.com.