Why Trivago N.V. Stock Has Lost 30% So Far This Year

MarketsMotley Fool

What happened

Shares of hotel-booking specialist Trivago (NASDAQ: TRVG) have continued to slide this year as the company has struggled to adapt to changes in marketing spending by key partners like Booking Holdings (NASDAQ: BKNG) and dealt with a tough comparisons from a year ago. According to data from S&P Global Market Intelligence, the stock has given up 30% through July 11.

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As you can see from the chart below, most of the stock's losses this year came after it badly missed the mark in its first-quarter earnings report, which came out at the end of April.

So what

Trivago, which went public at the end of 2016 after being spun off by Expedia, initially flew out of the gates: The stock had doubled by last summer. However, results were inflated by aggressive spending by Booking Holdings, which was focused on gaining market share at the time, and also penalties that Trivago assessed to Booking for violating its user terms.

Booking has since lowered its spending on Trivago, moving some of that budget to Google, and as a result, Trivago's revenue growth has dramatically slowed. The stock is actually down 78% from a year ago as revenue growth has gone from 67% in the second quarter of last year to a decline of 3% in the first quarter of 2018 to 259.4 million euros, which was in line with expectations. On the bottom line, the company turned in a loss of $0.07 per share compared to expectations for a $0.01-per-share loss. Shares tumbled 26% on April 25 when the news came out, essentially making up the stock's entire decline this year.

Now what

Trivage stock was also pressured by management cutting its outlook for the year from 5%-10% revenue growth to just flat, as it expects bidding partners to focus even more on profitability, thereby lowering cost-per-click rates. Still, it sees growth returning in the second half of the year and expects steady growth into the future, as the company is focused on carving out a larger portion of the hotel-booking market, spending aggressively on marketing.

If Trivago can return to steady growth, the stock should recover at least some of these losses.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.