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Why Trip.com Stock Dropped 14% This Morning

By Rich Smith - Jan 21, 2020 at 11:28AM

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A bird flu-like illness is giving China's Trip.com a feeling of malaise.

What happened

Shanghai-based online hotel and air reservations provider Trip.com Group (TCOM 1.24%) tumbled as trading resumed in the U.S. post-holiday, on Tuesday. Initially down nearly 14% in early-morning trading, Trip.com stock has recovered to about a 10.2% loss as of 10:30 a.m. EST.

Why is that?

Doctor holding a stethoscope to a parrot's chest

Image source: Getty Images.

So what

As you may have heard, China's in the midst of another wave of bird flu-like illness. Originating in the provincial capital of Wuhan weeks ago, the mysterious illness has already claimed six lives through Tuesday, with at least 300 patients ill. Adding to the complications, this outbreak comes amid China's Lunar New Year holiday travel season, which both adds to the risk of the virus spreading and is dissuading vacationers from traveling -- to the detriment of Trip.com's business.  

Now what

Trip.com is responding to the outbreak by allowing travelers to cancel some reservations free of charge. That's good news for Chinese health authorities, but not necessarily for Trip.com's income statement in the current quarter.

Already Wall Street is starting to shy away from the stock in consequence, and this morning analysts at investment bank Bernstein cut their rating on Trip.com stock from "outperform" to "market perform" and cut their price target on the shares to $39.  

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