HKEX-listed Trip.com Group Limited (HK:9961) (NASDAQ:TCOM) is an attractive pick for investors, driven by the rising travel demand in China. Additionally, analysts have a bullish outlook on the company’s prospects. Their optimism is driven by the strong recovery in Trip.com’s financials, as reflected in its annual results for 2023. The stock has received a Strong Buy rating with unanimous Buy recommendations, highlighting a favourable outlook for 2024.
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Trip.com Group is the leading travel agency, offering services such as hotel bookings, air tickets, and holiday packages. Trip.com Group is China’s largest online travel agency based on revenue.
Favorable Demand Backdrop for Trip.com
In the first quarter of 2024, China’s aviation sector saw a significant uptick in air passenger traffic, driven by strong domestic demand and government initiatives to boost tourism.
According to the CAAC (Civil Aviation Administration of China), China recorded 180 million air passenger journeys, reflecting a year-on-year increase of 38%. This also marks a 10% increase over the first quarter of 2019 (pre-pandemic).
In Q1 2024, domestic traffic increased by 14% to 160 million passengers compared to Q1 2019. However, international passenger volumes have not fully rebounded yet and are currently equivalent to approximately 78% of the levels observed in 2019.
DBS’ Bullish Views on Trip.com
In 2023, Trip.com’s net revenue amounted to ¥44.5 billion, marking a remarkable 122% surge from the previous year. Net income also reached ¥10 billion compared to ¥1.4 billion in 2022.
Following the results, analyst Tsz Wang from DBS confirmed a Buy rating and predicted an upside of 28% in the share price. Wang projects include a CAGR of 17% from FY23 to FY25 in the company’s revenue, attributed to the rebound from city lockdowns during COVID. Subsequently, the analyst anticipates sustained mid-teens annual revenue growth from FY25F to FY32F.
Over the long term, the Trips.com share price is expected to be lifted by increasing travel expenditure from mid-to-lower-tier cities and Gen-Z demographics. Moreover, a rising trend towards independent travel and an expanded range of travel experiences such as African safaris, diving, and skiing are expected to drive more demand for the company.
Is Trip.com Stock a Buy?
As per the consensus among analysts on TipRanks, 9961 stock earns a Strong Buy rating based on four Buy recommendations. The Trip.com share price target is HK$474.50, which implies an upside of 18% from the current price level.
Year-to-date, the stock has witnessed a huge 50% growth.
