Trip.com Earnings: Fair Value Up 14% After Margin Expansion Revisions, but Growth Momentum Slowing

We raise our fair value estimate by 14% to USD 50 (HKD 400) per share from USD 44 (HKD 352) after Trip.com reported first-quarter revenue and operating margin that were 3% and 520 basis points better than our expectations, respectively. Our valuation change reflects margin expansion revisions in our estimates of 100-200 basis points for the next five years. These come after the company guided to a 31% operating margin in the second quarter of 2024, which was also 300 basis points better than our previous forecast, due to operating leverage that appears to be recurring as Trip.com sees greater transaction volume. However, Trip.com guided to 11%-16% revenue growth year on year for the second quarter of 2024, less than our previous estimate of 24%, and we believe it reflects slowing travel momentum. While the midteens guidance still represents robust growth, we believe outsize pent-up demand is normalizing and the company will seek other growth drivers now. We lower our revenue growth forecast to 15% from 20% for the remainder of 2024.