Key Stats for Trip.com Stock
- Price Change for TCOM stock: -15%
- $TCOM Share Price as of Jan. 14: $75
- 52-Week High: $79
- $TCOM Share Price Target: $87
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What Happened?
Trip.com (TCOM) stock cratered 15% today after the company disclosed it was under investigation by China’s top business regulator. The State Administration for Market Regulation launched a probe into alleged abuse of the company’s dominant market position under China’s anti-monopoly law.
The investigation centers on complaints from homestay operators in Yunnan province who accused Trip.com and other online travel agencies of unfair practices.
According to an industry association, these practices include forcing businesses to accept one-sided contract terms, arbitrarily hiking commission rates, and blocking internet traffic to non-compliant partners.
Trip.com issued a statement saying it was “actively cooperating” with the investigation and would “fully implement regulatory requirements.” The company emphasized that business operations would continue normally during the probe.
The timing couldn’t be worse. The investigation comes just one month before Lunar New Year, one of the busiest travel periods in China. Trip.com stock is now on pace for its worst single-day decline since November 2018.
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What the Market Is Telling Us About Trip.com Stock
The brutal selloff in Trip.com stock reflects real fear about what Chinese regulators might do. Under China’s anti-monopoly law, companies found guilty of violating its provisions can face fines ranging from 1% to 10% of the previous year’s revenue.
For context, Trip.com reported third quarter revenue of roughly $2.6 billion, putting the company on track for annual revenue around $10 billion. A 10% fine would mean a $1 billion hit, which is massive for any company.
The precedent is scary. In 2021, Chinese regulators slapped Alibaba with a record $2.58 billion fine after an anti-monopoly investigation found the e-commerce giant abused its dominant position for years. That fine represented 4% of Alibaba’s 2019 domestic revenue.
What makes this particularly concerning for Trip.com stock is the nature of the complaints. Homestay operators are accusing the platform of wielding its market power to squeeze partners on commissions and terms.
That’s exactly the kind of behavior Chinese regulators have been cracking down on as they try to prevent excessive price competition and support small businesses.
- Trip.com dominates online travel in China.
- The company owns Ctrip, which is sometimes called “China’s Expedia” because of its widespread use among Chinese travelers. It also owns Skyscanner and other booking platforms.
- That dominant position makes it an obvious target for regulators looking to curb what they see as unfair competition.
The company’s recent financial results were actually quite strong. Third quarter revenue jumped 16% year-over-year, with accommodation bookings up 18%. Outbound travel from China surged nearly 20%, and international bookings on the platform grew 60%. The business is firing on all cylinders.
But none of that matters if regulators decide to make an example out of Trip.com. The Chinese government has become increasingly aggressive about reining in big tech companies. Beyond Alibaba, authorities have targeted other giants for various regulatory violations.
Recently, Beijing has also been cracking down on excessive price competition across industries. The government worries that brutal price wars hurt businesses and contribute to deflationary pressures in the economy.
If regulators view Trip.com’s commission practices as part of that problem, the company could face serious consequences.
Investors are right to be nervous. Trip.com stock was already down from its 52-week high before Wednesday’s crash. Now shares are more than 20% below those levels. If the investigation drags on or results in a massive fine, the stock could fall further.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
