Jefferies reiterates Trip.com stock rating with $88 price target

Trip.com beat Q4 2025 estimates with EPS $4.97 vs $4.77 and revenue $15.4B vs $14.86B; revenue grew 17% over the last twelve months and gross profit margin was 81%. Jefferies reiterated a Buy with a $88 price target while Barclays, Benchmark and Morgan Stanley trimmed PTs to $75/$72/$75 but kept Overweight/Buy ratings. Shares trade at $50.09 near a 52-week low of $48.48 with a P/E of 7.51, and InvestingPro flags the stock as undervalued versus fair value.

Analysis

Vertical AI and tighter control of the end-to-end travel stack are catalytic for a platform that can convert informational advantages into higher take-rates and lower variable service costs. Over 12–36 months this dynamic disproportionately benefits firms that own bookings, fulfillment and post-sale logistics — they capture incremental margin per customer while disintermediating small agencies and metasearch arbitrageurs. Supply-chain effects are subtle but real: better demand forecasting and dynamic packaging reduce refund/void rates and working-capital drag for package suppliers, meaning margin expansion can arrive without proportional revenue growth.

Execution risk is binary and front-loaded: near-term profitability will be determined by the efficiency of AI deployment and whether incremental marketing spend falls or rises as customer acquisition shifts to owned channels. Macro and regulatory cracks — a renewed consumer slowdown in mainland China, travel restrictions, or tighter data/privacy rules — can turn a multi-quarter re-rating into an earnings disappointment within 3–6 months. Conversely, a successful pilot that shows >20% reduction in service costs or a measurable uplift in conversion can trigger a rapid multiple re-rating among risk-seeking global funds.

The market appears to underweight non-linear margin upside from verticalization while overstating linear short-term expense noise. That divergence creates asymmetric payoff setups where disciplined, time-boxed exposure captures potential 40–80% upside on successful execution, with defined drawdowns if the AI rollout disappoints. Tactical sizing and hedges that isolate company-level execution from macro China risk are therefore essential.

Key Decisions for Investors

• Long TCOM equity (size 2–4% NAV): accumulate on weak opens or 5–10% intraday pullbacks; horizon 9–12 months; target +40–60% total return if AI-driven take-rate gains materialize; hard stop at -15% to limit idiosyncratic execution risk.
• Long-dated call spread on TCOM (12–15 month): buy near-the-money LEAP and sell a 25–30% OTM call to fund premium; max loss = net premium, target 2.0–3.0x return if multiple expansion or AI monetization proves sustainable.
• Covered-call income leg (if already long): sell 1–3 month calls 10–15% OTM to monetize structural seasonality and buy time on the thesis; expected near-term yield 3–5% while preserving upside capture if called away.
• Pair hedge for macro risk: run long TCOM versus short a China consumer discretionary ETF sized to neutralize beta (3–6 month horizon) to isolate company-level execution; reduces China macro tail while retaining upside from product/AI wins.