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Why Trivago N.V. Stock Plummeted Last Month

By Jeremy Bowman - Updated Oct 3, 2017 at 12:28PM

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Shares of the hotel-booking specialist stumbled after the company lowered its guidance.

What happened

Shares of Trivago N.V. (TRVG -0.57%) tumbled last month after the online travel agency lowered its guidance for the year. As a result, the stock finished September down 30%, according to data from S&P Global Market Intelligence, as growth stocks like Trivago often carry high expectations.

A man stands in an airport watching a plane take off.

Image source: Getty Images

As you can see from the chart below, nearly all of the stock's decline came when the company issued the updated guidance on September 6.

TRVG Chart

TRVG data by YCharts

So what

Trivago said it now expects revenue growth to be 40% this year, down from a previous forecast of 50% and well below 67% in its most recent quarter.

Even worse, management said that adjusted EBITDA would now be lower than last year, explaining that Revenue per Qualified Referral was falling faster than expected, which has caused the company to cut back on its marketing efforts.  

The company also noted that it was lapping a particularly strong summer last year, and that a weaker dollar is also pressuring earnings.

Now what

Trivago's guidance update comes as competition in the online travel market is tightening, with several players seeing slower growth. Priceline Group (BKNG 2.77%) also said it would pull back from hotel metasearch through sites like Kayak, which refers users to other sites like Trivago, and TripAdvisor (TRIP 4.95%) also gave downside guidance in its most recent report.  

That's been a particular problem for Trivago, which gets more than 40% of its revenue from metasearch, according to estimates, as it has lost more than half of its value since the summer after surging following its IPO last year. 

To overcome that, the company will need to do more to bring travelers directly to its own website.

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

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Stocks Mentioned

Trivago Stock Quote
Trivago
TRVG
$1.74 (-0.57%) $0.01
TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
TRIP
$27.34 (4.95%) $1.29
Booking Holdings Stock Quote
Booking Holdings
BKNG
$2,120.98 (2.77%) $57.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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