Why Trivago N.V. Stock Plummeted Today
What happened
Shares of Trivago N.V. (NASDAQ: TRVG) were heading south today as the hotel-booking specialist issued another disappointing earnings report and lowered its outlook for the year. Following a spike early last year, revenue growth continued to decelerate and turned negative in the first quarter. As of 10:25 a.m. EDT, the stock was down 20.5%.
So what
Trivago said revenue in the period declined 3% to 259.4 million euros ($316 million as of April 25, 2018), in line with analyst expectations, however it would have increased 5% in constant currency. Qualified referrals, or clicks to its partners' listings, increased 7% in the quarter, indicating that the underlying business continues to grow. However, revenue per qualified referral fell as the percentage of bookings Trivago gets for advertisers declined and partners focused on profitability rather than market share, which has become a pattern.
On the bottom line, the company reported a loss of $0.07 per share as costs rose across the board with selling and marketing expenses, its biggest category, increasing 10.9%. That compared to estimates of a $0.01 per share loss.
CEO Rolf Schromgens argued that recent investments would pay off later in the year. "Over the course of 2017 we invested heavily into building up both our team and technology to promote long-term growth," Schromgens said. "While impacting our operating costs, we believe the effects of this investment will become increasingly visible."
Now what
What really seemed to send Trivago shares lower was the company's decision to slash full-year guidance. In its previous report, management had projected 2018 revenue growth of 5% to 10% for the year, but now sees flat revenue for the year, expecting another decline in the second quarter before a return to growth in the second half of 2018. On the bottom line, management forecast an adjusted EBITDA loss of 25 million euros to 50 million euros, lower than its previous guidance of "slightly negative."
Shares hit an all-time low on the news, approaching $5, but if the company can deliver solid revenue growth later in the year, this sell-off could prove to be a buying opportunity.
10 stocks we like better than TrivagoWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Trivago wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of April 2, 2018
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.