Why Trivago N.V. Stock Soared Today

MarketsMotley Fool

What happened

Shares of Trivago N.V. (NASDAQ: TRVG) were moving higher today, though there was no obvious cause for the hotel-booking specialist's gains. One possibility is a short squeeze, which happens when a heavily shorted stock jumps on short-seller fears that the stock is rebounding, but there was no clear reason for such action. The stock closed up 13.8%.

Continue Reading Below

So what

Shares of Trivago were heavily traded today as volume was at 3 million at the close of the session compared to a recent average of just 653,000 shares traded daily. Such heavy trading is usually a sign of a short squeeze. Only 2.4% of shares outstanding are sold short, but nearly a third of the float, or the shares available for public trading, is sold short, indicating that a significant number of investors are betting against the stock.

Considering Trivago's recent troubles, including a dramatic slowdown in revenue growth as bidding patterns among its partners shifted, it's not surprising that investors think it will keep falling, especially as the stock recently hit an all-time low.

Now what

The rest of the online travel agency sector, including Booking Holdings, Expedia, and TripAdvisor, was quiet, adding another reason to believe Trivago's gains today were the result of a short squeeze. Though the double-digit jump is good news for shareholders, the company's fundamentals will have to change significantly in order for the stock to return to its former heights.

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 August 6, 2018

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