Company Reports

Narrow-moat Trip.com competes in China’s crowded online travel agent industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertising, in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China have cratered demand due to the inability to travel or unwillingness to quarantine.

Trip.com's revenue rose 6% in the second quarter to CNY 15.7 billion, while net loss was CNY 18.2 billion, due to the antimonopoly penalty fine levied by the government.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

Trip.com revenue increased 17% in the first quarter to CNY 16.2 billion, while the operating margin declined by 150 basis points year-on-year due to greater sales and marketing expenses.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

Trip.com revenue increased 25% in the fourth quarter to CNY 15.4 billion, while operating margin declined by 500 basis points year on year due to greater sales and marketing expenses.

According to the State Administration for Market Regulation, Trip.com is forcing local merchants to sign exclusive agreements with the platform. This has led to an investigation into monopoly practices.

Trip.com's revenue increased 16% year on year in the third quarter, driven by continued strength in travel demand.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

Trip.com reiterated its midteen revenue growth guidance for 2025 after the June-quarter revenue grew 16% year on year.

Trip.com's first-quarter revenue grew 16% year on year. It maintained its midteens revenue growth guidance for 2025, expecting demand for travel to continue into 2026.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

Trip.com's fourth-quarter revenue increased 23% to CNY 12.7 billion, but shares fell 12% in the Hong Kong trading session as its 2025 guidance fell short of 17%-20% expectations.

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.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

We raised our fair value estimate for Trip.com to $52 (HKD 416) per share from $50 (HKD 400) after it reported second-quarter revenue of CNY 12.8 billion, slightly above its guidance midpoint of CNY 12.7 billion. Adjusted operating margin was 27.8% this quarter, flat sequentially, but improved by 130 basis points year on year. The company’s CNY 15.6 billion guidance midpoint for third-quarter revenue represents 13.5% growth year on year. We are encouraged to see that its guidance defies current macroeconomic headwinds in China within the retail sector. In addition, we forecast operating margin (including share-based expenses) to increase by 150 basis points sequentially to 29.3% next quarter. Although third quarters usually have the highest operating margins due to seasonality, Trip.com also expects its personnel costs to increase minimally at 0%-5% year on year. We have slightly lowered our operating costs assumptions in the outer years, which explains the valuation increase. We believe China’s consumers are shifting their spending toward services rather than products and goods, and see Trip.com as the best-in-class company in China that offers travel services. For investors who still wish to gain exposure to China’s spending, we recommend shifting away from the retail goods sector and toward services, given changing consumer preferences.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

We raise our fair value estimate by 14% to USD 50 (HKD 400) per share from USD 44 (HKD 352) after Trip.com reported first-quarter revenue and operating margin that were 3% and 520 basis points better than our expectations, respectively. Our valuation change reflects margin expansion revisions in our estimates of 100-200 basis points for the next five years. These come after the company guided to a 31% operating margin in the second quarter of 2024, which was also 300 basis points better than our previous forecast, due to operating leverage that appears to be recurring as Trip.com sees greater transaction volume. However, Trip.com guided to 11%-16% revenue growth year on year for the second quarter of 2024, less than our previous estimate of 24%, and we believe it reflects slowing travel momentum. While the midteens guidance still represents robust growth, we believe outsize pent-up demand is normalizing and the company will seek other growth drivers now. We lower our revenue growth forecast to 15% from 20% for the remainder of 2024.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

Narrow-moat Trip.com competes in China’s crowded online travel agent, or OTA, industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.