On Tuesday, Trip.com Group Limited (NASDAQ: TCOM) saw its price target increased by an analyst at Jefferies from $75.00 to $77.00. The firm maintained its Buy rating on the stock, following the company's third-quarter earnings report.
Trip.com reported a 16% year-over-year increase in total revenue for the third quarter, reaching 15.9 billion yuan, slightly surpassing consensus and Jefferies' own estimates. The company's accommodation revenue, which represents 43% of the total, rose by 22% year-over-year to 6.8 billion yuan, aligning with projections. Transportation revenue, accounting for 36% of the total, also saw a 5% year-over-year increase to 5.7 billion yuan, exceeding estimates.
The earnings report detailed that packaged tour revenue, which makes up 10% of the total, grew by 17% to 1.6 billion yuan, while corporate travel revenue increased by 11% year-over-year to 656 million yuan. Other revenue streams experienced a substantial 41% year-over-year growth, reaching 1.2 billion yuan.
In terms of profitability, Trip.com's gross profit also saw a 16% year-over-year increase, amounting to 13.1 billion yuan, which was above Jefferies' estimate. The non-GAAP operating profit, excluding share-based compensation expenses, stood at 5.5 billion yuan, surpassing the firm's estimate due to lower-than-expected sales and marketing expenses, coupled with a higher gross profit. The company's non-GAAP operating margin reached 34%, exceeding the estimated 33%.
The non-GAAP net profit for the quarter was reported at 5.96 billion yuan, topping both consensus and Jefferies' expectations, which were set at 4.77 billion yuan and 5.47 billion yuan, respectively. The analyst highlighted Trip.com's strong execution and return on investment approach to spending, along with the positive outlook for the travel industry, particularly in the Asia-Pacific region.
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The firm anticipates a steady increase in subscribers and average revenue per user (ARPU), along with margin expansion over the coming years. Meanwhile, Trip.com has been the focus of multiple analyst notes.
Citi raised its 2025 and 2026 earnings estimates for the company, citing a strong market position and set a new price target at $72. On the other hand, TD Cowen adjusted Trip.com's price target downwards to $56, maintaining a Buy rating despite a more conservative outlook. Benchmark also maintained its Buy rating on Trip.com, holding its price target at $72.
These recent developments follow Trip.com's second-quarter revenue report, showing a year-over-year increase of 14%. In related news, China has imposed property freezes on nine American firms, including Sierra Nevada Corporation and Stick Rudder Enterprises LLC, in response to U.S. weapons sales to Taiwan.
InvestingPro Insights
Trip.com Group Limited's strong financial performance, as highlighted in the analyst report, is further supported by real-time data from InvestingPro. The company's impressive gross profit margin of 81.48% for the last twelve months as of Q2 2024 aligns with the 16% year-over-year increase in gross profit mentioned in the article. This metric underscores Trip.com's ability to maintain profitability while growing revenue.
Additionally, InvestingPro Tips reveal that Trip.com is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.17. This suggests that the stock may be undervalued considering its growth prospects, which could explain the analyst's decision to raise the price target.
The company's strong financial position is further emphasized by another InvestingPro Tip, which notes that Trip.com holds more cash than debt on its balance sheet. This financial stability positions the company well for future growth and potential market challenges.
For investors seeking more comprehensive insights, InvestingPro offers 10 additional tips for Trip.com Group Limited, providing a deeper understanding of the company's financial health and market position.
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