Analyst Note| Chelsey Tam |
We maintain our Trip.com fair value estimate at USD 39 per ADS and our long-term bullish view due to an eventual recovery from coronavirus and low penetration of outbound travel in China. We reduced our 2021 and 2022 revenue by 3% and 16%, respectively, and cut our non-GAAP EBIT margin by 860 basis points and 580 basis points. The domestic business recovery was strong in July, but cross-province travel was disrupted in August. The recovery has been slower in September. This leads to our non-GAAP EBIT margin estimate of negative 2.4% in the third quarter. We assume domestic revenue in the fourth quarter will be 5% higher than 2019’s level and international revenue will reach 4% of 2019’s level, with non-GAAP operating margin achieving about the mid-20s as it did in the third quarter of 2020. Our EBIT assumption for 2021 is still 94% below FactSet consensus as of Sept. 24. We expect earnings cuts in the future.