Analyst Note| Dan Baker |
Unsurprisingly, narrow-moat Trip.com reflected a strong domestic recovery in the third quarter, with the support of the October Golden Week holiday. While net revenue guidance for the fourth quarter is between a decline of 37% and 42%, in line with our estimate, we believe the near-term story of domestic recovery is now largely priced in, after a 33% run in the stock price since the end of June. The quarter-to-date run-rate in domestic hotel and air ticketing reservation displayed single-digit growth, representing a complete recovery while we expect some price pressure to remain. We see limited further upside from the domestic businesses. We expect the focus going into 2021 to be a recovery in international business. The company expects the international business to pick up in the second half of 2021 given the lead time of a mass rollout of vaccines, which aligns with our base-case assumptions. We slightly increase our fair value estimate from to USD 40 from USD 38 after updating the Chinese yuan currency assumption while a faster-than-expected recovery of the coronavirus situation worldwide could catalyze the share price.