Why Trivago NV Stock Plummeted Wednesday

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What happened

Shares of hotel search platform Trivago N.V. (NASDAQ: TRVG) were slammed on Wednesday after the company lowered its guidance for fiscal year 2017. Shares fell as much as 30.1%, but the stock is down about 20% at the time of this writing.

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Trivago said it now expects annual revenue growth for the year to be about 40% compared to fiscal year 2016. This is down significantly from management's previous guidance for 50% year-over-year revenue growth during the period. It's also down considerably from the company's 67% year-over-year revenue growth in its most recent quarter.

So what

The lower expected revenue comes as the company opts to reduce its marketing efforts compared to its previous plans. Management said it is reducing its marketing since its revenue per qualified referral is worse than anticipated.

Management also blamed difficult revenue comparisons in summer 2016 and foreign exchange effects.

These headwinds are also expected to negatively impact Trivago's adjusted EBITDA for fiscal year 2017. Management said it expects the key metric to be "lower than in 2016 but to remain positive."

Now what

In its press release about the lowered guidance, management said it believed these factors only represented a near-term challenge. Trivago said it is "unwavering in our belief in the medium to long-term potential of the business."

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