Time To Worry? Analysts Are Downgrading Their Trip.com Group Limited (NASDAQ:TCOM) Outlook
The latest analyst coverage could presage a bad day for Trip.com Group Limited (NASDAQ:TCOM), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the current consensus from Trip.com Group's 30 analysts is for revenues of CN¥21b in 2022 which - if met - would reflect a credible 3.3% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 54% to CN¥0.93 in the same period. Previously, the analysts had been modelling revenues of CN¥25b and earnings per share (EPS) of CN¥1.04 in 2022. Indeed, we can see that the analysts are a lot more bearish about Trip.com Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Trip.com Group
Despite the cuts to forecast earnings, there was no real change to the CN¥199 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Trip.com Group analyst has a price target of CN¥44.04 per share, while the most pessimistic values it at CN¥20.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Trip.com Group is an easy business to forecast or the underlying assumptions are obvious.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Trip.com Group's growth to accelerate, with the forecast 3.3% annualised growth to the end of 2022 ranking favourably alongside historical growth of 0.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 17% annually. So it's clear that despite the acceleration in growth, Trip.com Group is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Trip.com Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Trip.com Group's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Trip.com Group after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Trip.com Group going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
