Analyst Note| Chelsey Tam |
We have lowered our fair value estimate for Trip.com by USD 1 to USD 39 following Trip.com’s fourth-quarter results with non-GAAP operating profit beating our estimate. The company’s shares are fairly valued. After rolling our model, our five-year revenue CAGR is now 27% versus 26% previously. We have reduced our non-GAAP operating margin assumption in 2025 from 23.4% previously to 21.9%. We reduced 2021 revenue by 27% due to the Chinese government’s discouragement of citizens leaving their cities and provinces during Chinese New Year and slower-than-expected recovery in the international market. For 2021 and 2022, we now expect 39% and 9% declines, respectively, in net revenue compared with 2019. This is based on our domestic market revenue growth assumption of negative 11% and positive 20% versus 2019 and international market revenue growth assumption of negative 91% and negative 12% versus 2019. Trip.com’s non-GAAP operating margin is expected to increase to 8% in 2021 versus 3% in 2020. The investment in technology will help Trip.com with its cost structure, but it will be offset by increased marketing spending to drive recovery, product development costs, and better compensation to retain talent. In 2022, our non-GAAP operating margin of would be very similar to 2019’s 19% based on our assumption of higher reinvestment into the businesses offsetting the benefits of streamlined operations. We model non-GAAP operating margin of 30% by 2031, in line with the company’s guidance of 20% to 30% for the long term.