Shares of Tuniu Corporation (TOUR 0.17%), a travel company based in China, got crushed on Tuesday after the company released uninspiring results for the third quarter of 2020. Because of the COVID-19 pandemic, revenue is down sharply, leading to the stock's decline. As of 11:30 a.m. EST, Tuniu stock was down 18%.
Tuniu offers travel services, including guided international tour packages. Therefore, it doesn't just matter what's happening in China with the coronavirus -- it also matters what's happening in other countries.
As the pandemic rages on, there's almost no demand for Tuniu's services. Revenue in Q3 was down almost 86% year over year to a mere $18 million. This drop in revenue resulted in a net loss of $9 million.
Going forward, Tuniu's management sees a slight sequential improvement for its business. Fourth-quarter revenue is expected to "only" be down 70% to 75% from the fourth quarter of 2019. That's not as bad as Q3 but could mean the losses are set to continue for now. However, the company has $229 million on the balance sheet, which management believes will be sufficient to weather the storm.
Tuniu is a small-cap stock with a market-cap valuation of around $288 million. In 2019, the company reported full-year revenue of $328 million. Considering the market cap is below its proven revenue potential, investors might be lured into believing this is a good turnaround-stock play.
However, I'm not sure Tuniu is a great value, given its cash burn and upcoming uncertainty. In 2019, the company also reported a net loss of $105 million as it spent heavily on advertising. So this was a cash-burning company before the coronavirus.
Furthermore, the U.S. Congress is set to vote on the Holding Foreign Companies Accountable Act soon, which could cause international stocks to delist from U.S. exchanges if they don't submit to financial audits. While Tuniu could be a completely trustworthy company, it's worth noting that current financial reports are unaudited.