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Trip.com Group Ltd ADR TCOM

Morningstar Rating
$52.75 +0.79 (1.52%)
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Company Report

Trip.com Earnings: Fair Value Up 14% After Margin Expansion Revisions, but Growth Momentum Slowing

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.

Price vs Fair Value

TCOM is trading at a 582% premium.
Price
$52.75
Fair Value
$89.00
Uncertainty
High
1-Star Price
$64.70
5-Star Price
$45.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

The number of Chinese passport holders is only about 10%-15% of the population, which should provide Trip.com with secular demand given the low saturation.

Bears

International expansion may fall flat given greater competition beyond China's borders and could pressure margins as it prioritizes growth.

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News

Trading Information

Previous Close Price
$51.96
Day Range
$52.0653.13
52-Week Range
$30.7058.00
Bid/Ask
$52.00 / $52.98
Market Cap
$34.11 Bil
Volume/Avg
7,326 / 3.9 Mil

Key Statistics

Price/Earnings (Normalized)
16.61
Price/Sales
5.29
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
0.66%

Company Profile

Trip.com is the largest online travel agent in China and is positioned to benefit from the country's rising demand for higher-margin outbound travel as passport penetration is only 12% in China. The company generated about 78% of sales from accommodation reservations and transportation ticketing in 2020. The rest of revenue comes from package tours and corporate travel. Before the pandemic in 2019, the company generated 25% of revenue from international business, which is important to its margin expansion. Most of sales come from its online platform, but the company also maintains offline call centers. The competes in a crowded OTA industry in China, including Meituan, Alibaba-backed Fliggy, Tongcheng, and Qunar. The company was founded in 1999 and listed on the Nasdaq in December 2003.
Sector
Consumer Cyclical
Industry
Travel Services
Stock Style Box
Large Growth
Total Number of Employees
36,249

Competitors

Valuation

Metric
TCOM
BKNG
TRIP
Price/Earnings (Normalized)
16.6125.9513.16
Price/Book Value
1.873.02
Price/Sales
5.296.161.42
Price/Cash Flow
19.3521.7812.29
Price/Earnings
TCOM
BKNG
TRIP

Financial Strength

Metric
TCOM
BKNG
TRIP
Quick Ratio
0.951.201.64
Current Ratio
1.151.281.69
Interest Coverage
5.215.972.68
Quick Ratio
TCOM
BKNG
TRIP

Profitability

Metric
TCOM
BKNG
TRIP
Return on Assets (Normalized)
6.83%22.51%7.31%
Return on Equity (Normalized)
12.41%23.73%
Return on Invested Capital (Normalized)
8.67%42.97%10.93%
Return on Assets
TCOM
BKNG
TRIP
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Travel Services Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
BKNG
Booking Holdings IncTtcqbsfrzMkmzvbs$128.8 Bil
ABNB
Airbnb Inc Ordinary Shares - Class AKngknvcNxztbln$91.7 Bil
RCL
Royal Caribbean GroupBclrdgwjpDmlqbf$38.2 Bil
TRPCF
Trip.com Group LtdMxttw$34.4 Bil
CCL
Carnival CorpPbvpdrfmsSbxxfd$19.8 Bil
EXPE
Expedia Group IncQqxjrgfkVwmyf$14.6 Bil
VIK
Viking Holdings LtdCmqf$12.8 Bil
NCLH
Norwegian Cruise Line Holdings LtdNnrlltjwFznmxz$6.9 Bil
TRIP
Tripadvisor IncNfspknzjbYqwc$2.5 Bil

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