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Wednesday’s trading session saw Trip.com Group Limited (NASDAQ:TCOM) shares maintain their Outperform rating and $75.00 price target, as reiterated by Bernstein SocGen Group analysts. The firm’s analysis highlighted Trip.com’s recent financial performance and strategic decisions in the face of increasing competition. InvestingPro data shows the company maintains excellent financial health with a "GREAT" overall score, supported by strong profitability metrics and robust balance sheet management.
Trip.com reported first-quarter revenue for 2025 at 13.8 billion yuan (RMB), marking a 16.2% increase year-over-year, which aligned with market estimates. Despite this, the company’s gross margin came in at 80.4%, falling short of expectations due to a higher proportion of revenue from Trip.com’s own services. Operating profit for the quarter reached 3.56 billion yuan, attributed to a year-over-year increase in sales and marketing (S&M) spending, particularly on international marketing. However, the S&M expenses were lower than anticipated, accounting for 21% of revenue.
The company’s international business has been experiencing volume growth, but management has expressed concerns over competitive pressures, specifically from discounting practices in the airline ticketing sector by rivals such as Agoda. Bernstein SocGen Group’s analysis pointed out that Trip.com is facing the most intense pricing pressure in Korea and Thailand, where Agoda’s pricing is nearly single digits lower than Trip.com’s offerings.
In response to this competitive landscape, Trip.com has chosen a strategic approach to discounting. While the company has offered approximately 15% discounts on airfare to stimulate hotel cross-selling, it has refrained from applying direct discounts to hotel bookings. This decision aims to protect the profitability of the hotel segment, which traditionally enjoys higher take rates of 8-10%, compared to 3-4% for airfare.
The analyst’s commentary suggests that Trip.com’s conservative approach to sales and marketing spending, along with its strategic discounting in airfare, positions the company to navigate the competitive pressures without undermining its core hotel business. As of the close of Wednesday’s market, Trip.com’s stock performance and future outlook remain in line with Bernstein SocGen Group’s analysis. Trading at a P/E ratio of 19.76, the stock currently sits below its InvestingPro Fair Value, suggesting potential upside opportunity. For deeper insights into Trip.com’s valuation and growth prospects, investors can access comprehensive analysis and additional ProTips through the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Trip.com Group Limited reported a strong first quarter for 2025, with a year-over-year revenue increase of 16%, surpassing profitability expectations. The company has confirmed its financial outlook for the second quarter and the full year, aiming for mid-teens growth. Analysts from Benchmark, Citi, Jefferies, and Bernstein have shown confidence in Trip.com’s performance, maintaining Buy or Outperform ratings and adjusting price targets accordingly. Benchmark reiterated an $80 price target, while Citi raised its target to $78, and Jefferies increased theirs to $80.
Trip.com’s robust domestic travel activity and positive trends in international markets have been highlighted as key growth drivers. The company is focusing on enhancing user engagement and operational efficiency through artificial intelligence, which is expected to improve customer experience and scalability. Despite macroeconomic uncertainties, analysts believe Trip.com’s digital transformation and geographic diversification position it well for future growth. The company has also filed its unaudited financial results for the first quarter of 2025 with the U.S. Securities and Exchange Commission, providing a detailed account of its financial health and operations.
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