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Last week saw the newest yearly earnings release from Trip.com Group Limited (NASDAQ:TCOM), an important milestone in the company's journey to build a stronger business. It looks like the results were pretty good overall. While revenues of CN¥18b were in line with analyst predictions, statutory losses were much smaller than expected, with Trip.com Group losing CN¥5.45 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the 34 analysts covering Trip.com Group are now predicting revenues of CN¥24.1b in 2021. If met, this would reflect a huge 32% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 95% to CN¥0.29 per share. In the lead-up to this report, the analysts had been modelling revenues of CN¥26.0b and earnings per share (EPS) of CN¥1.54 in 2021. There looks to have been a significant drop in sentiment regarding Trip.com Group's prospects after these latest results, with a minor downgrade to revenues and the analysts now forecasting a loss instead of a profit.
The average price target lifted 11% to US$42.29, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Trip.com Group at US$52.00 per share, while the most bearish prices it at US$19.10. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Trip.com Group's rate of growth is expected to accelerate meaningfully, with the forecast 32% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 12% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 17% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Trip.com Group is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Trip.com Group to become unprofitable next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Trip.com Group analysts - going out to 2025, and you can see them free on our platform here.
Even so, be aware that Trip.com Group is showing 1 warning sign in our investment analysis , you should know about...
This article by Simply Wall St is general in nature. 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.
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