Trip.com Group Limited

Executive Summary

BUY, Medium conviction. Rated BUY, Medium conviction. The stock sits 50.5% below its 52-week high and trades at just 5.46x FY2025 EPS despite 13.3% revenue growth, 17.4% EPS growth, and a still-strong 26.1% operating margin. The catch is real: management guided Q2 2026 revenue growth to just 3%-8%, margin already compressed in Q1, and recent execution has been uneven, so the upside to the $66.78 base target is attractive but not clean.

Investment Thesis

The market is pricing TCOM like a business that has already rolled over hard. The actual numbers do not show that. FY2025 revenue grew 13.3% to $9.0B, EPS grew 17.4% to $7.33, net margin was 30.8%, and operating margin held at 26.1% despite a slight year-over-year decline from 26.6%. Against that earnings base, the stock sits at 5.46x P/E, 1.03x P/B, and 2.64x P/S. That is too cheap for a travel platform still posting strong cross-border demand and carrying low balance-sheet risk.

The stock is cheap for a reason, and that reason is the next few quarters. Management explicitly said, "Looking into the second quarter, we expect net revenue growth of approximately 3% to 8% year-over-year." That is a meaningful deceleration from Q1’s 17% growth. It also comes with margin pressure already visible, as Q1 EBITDA margin was 25.5%, down 980 bps YoY. Add recent earnings misses, -4.7%, -1.4%, and -2.4%, and this is not a clean momentum story. It is a rerating story that requires investors to believe the current slowdown is cyclical and operational, not structural.

That bet is still attractive at $39.08 because the parts of the business that matter most for medium-term value are still moving the right way. International OTA bookings +65% YoY and inbound bookings +90% YoY show that TCOM’s best growth vectors remain healthy. Management’s target to serve 200 million inbound travelers over the next five years is ambitious, but directionally it signals that inbound and cross-border are becoming larger pillars of the model, not side businesses. Those segments should carry better strategic value than mature domestic volume, especially if APAC expansion keeps scaling.

Conviction is Medium, not High, because the market is demanding proof on two points. First, Q2 and 2H need to show that growth can settle above the low single digits after airfare, capacity, and compliance disruptions. Second, margins need to stop stepping down. If those two conditions are met, the stock can move a long way simply by being valued like a normal profitable platform rather than a broken cyclical. If they are not, the low multiple will have been a warning, not an opportunity.

Key Metrics

Financial Strength

Financial risk is low. Leverage is modest at 0.79x Debt/EBITDA and 0.19 Debt/Equity, and the 1.53 current ratio suggests no near-term funding pressure even in a softer booking environment. The more important question is not solvency but earnings quality through the cycle. FY2025 margins were strong enough to support the stock’s undervaluation, but the Q1 2026 EBITDA margin drop shows that TCOM is not immune to airfare, capacity, and compliance friction. With FCF $0.0B in the supplied data, cash conversion needs a cleaner update before balance-sheet strength can become a major catalyst.

Competitive Position

TCOM’s edge is not just traffic. It sits in the combination of supply relationships, localized fulfillment, cross-border travel complexity handling, and a broad booking stack across hotel, air, rail, and packages that improves conversion and repeat use. That moat is durable if it keeps scaling internationally and absorbs regulatory complexity better than smaller rivals, but it is not unassailable because AI can weaken upper-funnel distribution advantages and make comparison shopping easier unless TCOM remains the best merchant and service layer.

Management & Guidance

Management’s current guide is cautious and should be taken at face value. Cindy Wang said, "Looking into the second quarter, we expect net revenue growth of approximately 3% to 8% year-over-year," and also noted that, "Growth has moderated from the exceptionally strong Q1 environment, reflecting a combination of macro and operational factors." Those factors are specific, higher airfares, tighter airline capacity, geopolitical disruptions, compliance upgrades, and rail-related product changes. Given the recent beat/miss record and the 980 bps YoY EBITDA margin decline in Q1, guidance credibility is decent on demand direction but weaker on short-term profitability, so the next print matters more than management’s tone.

Segment Analysis

• Product mix (Not disclosed in provided data): Core OTA remains the earnings center, with gross bookings approximately RMB 300B in Q1 2026; strongest disclosed growth came from international hotel and transport demand.
• International OTA (Not disclosed in provided data): Growth remains the key swing factor, +65% YoY bookings in Q1 2026 after ~70% revenue growth in 2024 Q2, led by APAC expansion.
• Inbound travel (Not disclosed in provided data): Demand remains structurally strong, +90% YoY bookings in Q1 2026, with management targeting 200M inbound travelers served over the next five years.
• Geography (China anchored with international exposure increasing): Provided data does not split revenue by geography, but management’s 2026 focus is international market expansion in APAC and inbound travel into China.

Capital Allocation

Capital allocation reads conservative but under-disclosed in the provided data. Historical management commentary from 2024 emphasized organic growth over M&A, supported by RMB99.0B of cash and investments at that time, and the current balance sheet still looks clean with Debt/EBITDA 0.79 and Debt/Equity 0.19. The weak spot is shareholder yield, reflected in a Shareholder Returns quality sub-score of 13, and the deep-dive data shows $0.0B for buybacks, dividends, and capex, which limits the near-term case for capital return support at this depressed price.

Management Execution & Track Record

Execution is mixed, not broken. On the 2024 Q2 call, management said, "With regard to the forecast for the second half, despite we always have very limited visibility due to the short booking windows in China, we expect the travel activities in the second half to generally follow normal seasonal patterns," and that Q3 margin would be slightly above Q2 while Q4 would be the slowest season. Since then, the business did keep growing, FY2025 revenue reached $9.0B, up 13.3%, and EPS rose 17.4% to $7.33, so the broad demand thesis was right. But margins did not stay on the cleaner path implied in 2024: Q1 2026 EBITDA margin fell to 25.5%, down 980 bps YoY, versus 35% adjusted EBITDA margin in 2024 Q2, and recent quarterly EPS performance turned choppier with misses of -4.7%, -1.4%, and -2.4% around the last five quarters. Direction has shifted from recovery and expansion to balancing growth with compliance and capacity constraints. Management still looks credible on strategy, especially international and inbound, but less reliable on near-term margin cadence than it looked two years ago.

Positioning & Flows

Positioning is more helpful than harmful. Short interest is only 2.08% of shares outstanding, or 12.17M shares with 3.9 days-to-cover, so there is no heavy bearish consensus embedded, but also no obvious squeeze fuel. Institutional ownership is meaningful but not crowded, with the top 3 holders at 24.3%, while options positioning is in a negative gamma regime and spot is below the $43.83 zero-gamma level, which can keep price action unstable until fundamentals improve.

Bull Case

• FY2025 showed real operating earnings power, $9.0B revenue, $7.33 EPS, 26.1% operating margin, and 30.8% net margin, which is not consistent with a distressed 5.46x earnings multiple.
• The international engine is still growing fast, with international OTA bookings +65% YoY and inbound bookings +90% YoY in Q1 2026, supported by visa easing and cross-border infrastructure.
• Balance sheet risk is low, with Debt/Equity 0.19, Debt/EBITDA 0.79, and Current ratio 1.53, which gives management room to absorb a slower quarter without equity dilution or balance-sheet stress.
• Product adjacency is broadening beyond core hotel and air, with Old Friends Club hotel bookings +100%+ YoY and entertainment-driven travel +74% YoY, evidence that demand is diversifying rather than collapsing.

Bear Case

• Management itself guided a sharp slowdown, with Q2 2026 net revenue growth of only 3%-8% YoY after +17% YoY in Q1, citing airfare, capacity, geopolitical, compliance, and rail ticketing headwinds.
• Profitability is moving the wrong way near term: Q1 2026 EBITDA was RMB 4.8B and the provided margin was 25.5%, down 980 bps YoY, which matters more than the low headline P/E if margins have peaked.
• Recent earnings delivery is mixed to weak, with misses in 3 of the last 5 reports before the next print, including -4.7%, -1.4%, and -2.4% versus consensus.
• The stock’s low multiple is not purely a mistake, because forward visibility is limited and management explicitly flagged limited 2H visibility due to short booking windows and market fluctuations.

Valuation & Price Target

Engine price target $66.78 (+70.9% vs current), Low confidence.

• P/E Multiple: $1197.01 (0% weight)
• PEG (growth-adjusted): $1276.27 (0% weight)
• P/S Multiple: $34.36 (20% weight)
• Quality-adjusted: $51.66 (20% weight)
• DCF: $350.04 (1% weight)

This call stays aligned with the quant baseline, BUY with Low conviction, but upgrades the conviction to Medium because the disconnect between price and current earnings is too large to ignore. The engine’s $66.78 target already carries Low confidence, and that caution is warranted because the valuation blend is noisy, peer dispersion is very wide at 3.4x, and some methods produce absurd outputs like P/E Multiple $1197.01 and PEG $1276.27, which are not investable anchors. The right way to underwrite TCOM is simpler: a company with $9.0B revenue, $7.33 EPS, 26.1% operating margin, and low leverage should not trade at 5.46x unless earnings are about to structurally break. The Q2 3%-8% guide and Q1 margin drop say caution, not collapse. Analyst consensus is also bullish, but that is only context, not part of the thesis.

Risk Assessment

Risk score 17/100 (Low). The biggest risk is that Q1’s 980 bps YoY EBITDA margin compression is not temporary, and Q2’s guided 3%-8% revenue growth marks the start of a lower-margin, slower-growth phase rather than a brief air-capacity and compliance reset.

The Bottom Line

TCOM rates a BUY with Medium conviction. The stock is too cheap at 5.46x FY2025 EPS for a company that still has real cross-border growth and low leverage, especially with shares already down 50.5% from the high. The reason conviction is not High is simple: Q2 growth is guided to just 3%-8% and margin pressure is real. The setup favors buyers willing to look 1-2 years out, not traders demanding a clean quarter. A sustained drop in growth below the guided range or another step down in margins would change the call.