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Why Trivago N.V. Stock Jumped 19% Last Month

By Jeremy Bowman - Updated Feb 5, 2018 at 4:21PM

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Shares of the hotel-booking platform rose as the stock seemed to benefit from a short squeeze.

What happened

Shares of Trivago N.V. (TRVG -2.55%) moved higher last month, apparently on a short squeeze, as there was little company-specific news out on the hotel-booking platform. According to data from S&P Global Market Intelligence, the stock finished the month up 19.2%.

As you can see in the chart below, it was a volatile month for the stock, with no clear theme visible in its gains:

TRVG Chart

TRVG data by YCharts.

So what

From a wider perspective, Trivago's volatility in January was just a continuation of the stock's rocky history, as the stock had doubled at one point last year before finishing 2017 down 42%.

Last month, there was no direct news out on Trivago, but shares seemed to rise on a short squeeze, as bearish investors covered their bets while the stock rose, pushing it higher. About 20% of the stock is sold short.

The stock had a number of high-volume days when it rose for no apparent reason, first on Jan. 4 when it rose 3%, and then on Jan. 11 when it surged 13%. Finally, the stock had its biggest gains of the month over a two-day span on Jan. 25 and Jan. 26, when it climbed 17%.

A person makes a booking for a hotel room online.

Image source: Getty Images.

Now what

The online travel sector has been pressured of late; Priceline Group has scaled back on ad referrals to companies like Trivago and TripAdvisor as competition in the industry seems to be increasing. As a result, many of the sector's stocks have fallen in recent months. Trivago, meanwhile, has seen its revenue growth suddenly tank; analysts now expect sales to decline in the current quarter.

We'll learn more when the company reports fourth-quarter earnings on Wednesday. Analysts expect revenue to grow 8.3% to $229 million, and see a per-share loss of a penny, down from a $0.03 per-share profit a year ago. Guidance will be important, since the stock could tumble if management doesn't have a plan for boosting revenue growth.

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