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Trip.com Group Ltd ADR TCOM

Morningstar Rating
$47.34 +2.67 (5.98%)
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Company Report

Trip.com Earnings: Increasing Fair Value by 22% As International Revenue Begins to Ramp Aggressively

We raise our fair value estimate for Trip.com to USD 44 (HKD 352) from USD 36 (HKD 290) after the firm said on its fourth-quarter earnings call that it will aggressively expand its overseas platform. The aim is for the platform to increase its contribution to overall revenue to 15%-20%, from the 6% currently, in the span of 3-5 years. The company also reiterated a long-term non-GAAP operating margin target of 25%-30%—or a GAAP operating margin of 20%-26%—including stock compensation expenses. This may imply that it may not have to sacrifice significant profitability while expanding its business. Trip.com’s international outbound revenue has also recovered to about 90% of prepandemic levels, above the industry average of 70%, which should suggest market share gains on the nondomestic end. Our new fair value estimate reflects a more favorable outlook for international travel and assumes that international revenue can grow at a 23% CAGR from 2023-28, revised from 18% previously. We expect only minor changes to our domestic revenue growth forecast as Trip.com again expects it should decelerate to the high teens year over year in 2024, from 103% growth in 2023. Despite our fair value increase, we view the shares as fairly valued, but suggest position accumulation upon a pullback as China’s travel sector remains resilient amid the country's macroeconomic headwinds.

Price vs Fair Value

TCOM is trading at a 8% premium.
Price
$47.34
Fair Value
$94.00
Uncertainty
High
1-Star Price
$64.20
5-Star Price
$16.40
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

The company can eventually reach its 20%-30% long-term operating margin target as COVID-19 subsides.

Bears

Operating margins fall short of long-term outlook due to snags from COVID-19 or government policies. Continued lockdown will further complicate the outlook for the entire travel industry in China.

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News

Trading Information

Previous Close Price
$44.67
Day Range
$45.8547.45
52-Week Range
$30.7047.45
Bid/Ask
$46.66 / $47.34
Market Cap
$30.59 Bil
Volume/Avg
9.5 Mil / 3.9 Mil

Key Statistics

Price/Earnings (Normalized)
17.68
Price/Sales
4.92
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

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. Prior to 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 websites and mobile platforms, while the rest come from 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
32,202

Competitors

Valuation

Metric
TCOM
03690
BKNG
Price/Earnings (Normalized)
17.6853.5325.56
Price/Book Value
1.562.80
Price/Sales
4.921.526.78
Price/Cash Flow
12.5223.16
Price/Earnings
TCOM
03690
BKNG

Financial Strength

Metric
TCOM
03690
BKNG
Quick Ratio
0.941.401.35
Current Ratio
1.171.751.44
Interest Coverage
5.947.817.72
Quick Ratio
TCOM
03690
BKNG

Profitability

Metric
TCOM
03690
BKNG
Return on Assets (Normalized)
5.23%3.06%21.59%
Return on Equity (Normalized)
9.41%5.79%432.17%
Return on Invested Capital (Normalized)
6.52%4.40%37.87%
Return on Assets
TCOM
03690
BKNG
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Travel Services Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
BKNG
Booking Holdings IncHtvqfy$122.3 Bil
ABNB
Airbnb Inc Ordinary Shares - Class AHwhywq$97.4 Bil
RCL
Royal Caribbean GroupWpwgnhx$31.3 Bil
TRPCF
Trip.com Group LtdRbsnfg$30.3 Bil
CCL
Carnival CorpFzjxh$19.9 Bil
EXPE
Expedia Group IncRjsgzv$18.6 Bil
NCLH
Norwegian Cruise Line Holdings LtdDcvbnf$6.9 Bil
TRIP
TripAdvisor IncNnw$3.8 Bil
SABR
Sabre CorpWvbqhq$1.0 Bil

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