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Trip.com Posts Tepid 4Q Results; Shares Rise On China Recovery

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Trip.com Group Ltd. reported weaker-than-expected results for the fourth quarter. However, shares of the China-based online travel and related services provider were up 4.4% in Thursday’s pre-market trading due to a strong recovery trend in China.

Trip.com (TCOM) reported 4Q adjusted earnings of $0.27 per ADS [American Depository Share], much higher than analysts' estimates of $0.04. However, it is lower than the year-ago earnings per ADS of $0.28.

Revenues of $761 million came in below the Street's estimates of $768.9 million and declined 40% year-over-year due to the negative impact of the COVID-19 pandemic. Revenues were down 9% from the third quarter. Management blamed seasonality for the decline.

The company said that its domestic business witnessed a strong recovery as the spread of the COVID-19 virus was curbed in China.

Notably, China's domestic air ticketing business as well as domestic hotel GMV [gross merchandise volume] showed positive year-over-year growth in 4Q. Furthermore, mid-to-high-end domestic hotel reservations witnessed double-digit year-over-year growth in 4Q. (See Trip.com stock analysis on TipRanks).

Following the results, Oppenheimer analyst Jed Kelly raised the stock’s price target to $45 (13% upside potential) from $38, “on travel entering a sharp multi-year recovery that we expect to begin this spring.” Kelly maintained a Buy rating and said, “We see TCOM poised to lead China's recovery and believe it can become a larger player in APAC [Asia Pacific] given the company's abilities to maintain its scale relative to smaller regional players.”

Overall, the rest of the Street has a bullish outlook on the stock with a Strong Buy consensus rating based on 6 Buys and 1 Hold. The average analyst price target of $45.10 implies upside potential of about 13% to current levels. Shares have gained about 31% over the past year.

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