Trip.com: Still A Buy With Above-Expectations Q1 Earnings (NASDAQ:TCOM)

Elevator Pitch
I am reiterating my Buy investment rating for Trip.com Group Limited (NASDAQ:TCOM) [9961:HK] shares. In my previous write-up on October 5, 2023, I highlighted Trip.com Group’s attractive valuations and catalysts for re-rating. This update focuses on TCOM’s latest quarterly financial performance, which exceeded expectations.

TCOM Delivered A Substantial Earnings Beat For Q1 2024
On May 20, 2024, TCOM reported its Q1 2024 financial results, surpassing both top and bottom-line expectations. Net revenue increased by +29.4% YoY to RMB11,921 million, beating analysts’ consensus forecast. The company cited strong travel demand in China, stabilized supply, and relaxed visa requirements as key drivers. Accommodation reservation and transportation ticketing segments contributed 80% of Q1 2024 revenue, with growth rates of +29.2% YoY and +20.3% YoY, respectively. TCOM achieved a significant +44.9% earnings beat, with non-GAAP net profit rising by +96.4% YoY to RMB4,055 million.

Favorable Outlook For Full-Year 2024
TCOM is expected to continue performing well for the rest of the year, supported by projections of rebounding outbound travel in China. The company’s strong Q1 2024 results point towards a positive full-year performance. Factors such as stabilized air flights supply, relaxed visa requirements, and increased international routes capacity bode well for TCOM’s growth in 2024.

International Online Travel Agency Business Has Good Growth Potential
TCOM’s OTA business, Trip.com, saw revenue surge by +80% YoY in Q1 2024, indicating strong growth prospects. With only a 10% contribution to Q1 2024 revenue, there is room for the OTA business to expand its share. The Asian region presents significant growth opportunities for TCOM’s OTA business, with plans to become a leading travel platform in Asia in the coming years.

Key Risks
Risks for TCOM include potential delays in Chinese outbound travel recovery and investments impacting the profitability of the international OTA business. Despite these risks, TCOM has shown strong cost management capabilities, as evidenced by its Q1 2024 earnings beat.

Final Thoughts
Trip.com Group’s recent quarterly results highlight good expense management, a recovering outbound travel market, and strong growth prospects for the international OTA business. TCOM’s undervalued shares, coupled with its superior revenue growth outlook compared to peers, make it an attractive investment opportunity.



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