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Here's Why Group Stock Spiked Higher on Friday

By Jon Quast – Sep 25, 2020 at 3:05PM

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Travel in China is back to normal, but that can't be said about the rest of the world.

What happened

Shares of Chinese travel-booking company Group (TCOM -0.03%) went up on Friday, after the company reported unaudited results for the second quarter of 2020. As expected, revenue and earnings took substantial hits with people traveling less because of COVID-19. But financial results didn't decline as much as expected. This was taken as good news, sending the stock higher.

As of 3 p.m. EDT, stock was up 9%.

A businessman draws an upward arrow over a stock chart displayed on a transparent touchscreen.

Image source: Getty Images.

So what

In Q2,'s revenue plummeted 64% year over year to $448 million. According to management, this was due to ongoing global travel restrictions. In China, by contrast, domestic bookings for airfare and hotels recovered fully by August, giving hope that a worldwide travel recovery is on its way.

Not surprisingly, reported an operating loss for Q2. Its operating loss was $97 million, which included $70 million in stock-based compensation, leading to a non-GAAP (adjusted) loss of $0.27 per American depository share (ADS). As bad as it sounds, Wall Street was bracing for a non-GAAP loss of $0.43 per ADS.

With results not "as bad" as feared, stock keeps recovering. It's now down only 10% in 2020.

TCOM Chart

TCOM data by YCharts

Now what

As cheerful as management sounded about a global recovery in travel, third-quarter guidance paints a more somber picture. Revenue is expected to be down 47% to 52% as compared to the third quarter of 2019. This shows there's still a lot more recovery that needs to happen before this international stock is back to normal. 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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