Trip.com Reports Better-Than-Expected Q3 Result but Recovery in 2023 Remains Key to Valuation

We maintain our fair value estimate for Trip.com at USD 31 after the company posted better-than-expected third-quarter revenue, but partially offset by the possibility of disruptions to recovery in 2023. We are encouraged by the company’s results, which suggest that recovery started even before the recent protests. However, Trip.com guided for fourth-quarter revenue of CNY 4.85 billion—only an increase of 5% year on year—due to lockdowns in October and November before the government eased its quarantine and testing requirements. Trip.com’s tepid outlook does not change our view that the rate of recovery in 2023 remains the key factor for the company currently, as the stock is fairly valued, in our opinion. As of Dec. 14, the current price suggests a 2023 forward P/E multiple of 30 times. Compared to the prepandemic 2019 forward P/E multiple of 26 times, we think the stock is priced in already and further upside is now contingent on unexpected catalysts such as sooner-than-expected recovery of international travel or full unrestricted domestic travel in the near term.