Morgan Stanley raises Trip.com stock price target to $78 from $73

Morgan Stanley raised its price target on Trip.com (TCOM) to $78 from $73, maintaining an Overweight rating, driven by adjustments to their RMB/USD exchange rate forecast (now 7.15 versus 7.5). This follows Trip.com's Q1 revenue increase of 16.2% year-over-year to 13.8 billion yuan, aligning with estimates, and reflects similar price target increases from Citi (to $78) and Benchmark (to $80), while CFRA adjusted its target to $65 with a Hold rating, anticipating moderated revenue growth.

Analysis

Morgan Stanley has revised its price target for Trip.com Group Limited (TCOM) upwards to $78 from $73, reiterating an Overweight rating, primarily driven by an adjusted macro foreign exchange forecast to 7.15 RMB per US dollar from 7.5 RMB/USD. This FX adjustment also led to updated bull and bear case valuations of $91 and $47, respectively. Trip.com, currently trading at $63.65 with a market capitalization of $41.6 billion, exhibits strong fundamentals, including an 81% gross profit margin according to InvestingPro, which also suggests the company is undervalued with a financial health score of 3.42 (GREAT). Recent Q1 2025 results showed a 16.2% year-over-year revenue increase to 13.8 billion yuan, aligning with market estimates, although the operating profit of 3.56 billion yuan was accompanied by a gross margin of 80.4%, slightly below expectations. Other analysts largely share a positive outlook: Citi increased its target to $78 (Buy), Benchmark reiterated Buy with an $80 target, and Bernstein SocGen maintained an Outperform rating ($75 target), citing strong domestic and outbound travel performance and strategic discounting. Conversely, CFRA adjusted its target to $65 with a Hold rating, anticipating revenue growth moderation. Trip.com is actively pursuing growth through expansion into lower-tier Chinese cities, product enhancements, and leveraging AI for operational efficiency and user engagement.

Key Decisions for Investors

• Investors should note the positive sentiment from multiple analysts and Trip.com's strong fundamentals, including its high gross profit margin and potential undervaluation, which support the Overweight/Buy ratings.
• Consider the sensitivity of Trip.com's valuation to RMB/USD exchange rate fluctuations, as demonstrated by Morgan Stanley's forecast adjustment being a key driver for the price target increase.
• Monitor the company's ability to sustain revenue growth and maintain margins amidst competitive pressures and its strategic initiatives in lower-tier cities and AI, particularly in light of CFRA's caution regarding growth moderation.