What happened
Shares of Trivago (TRVG +3.75%) were bouncing back today as value hunters seemed to spy opportunity in the hotel metasearch company after the stock had fallen nearly 40% since the coronavirus sell-off first began. Shares jumped as much as 23% this morning as the broad market opened higher and were trading up 4.9% as of 11:46 a.m. EDT, even as the S&P 500 had given up most of its gains.
So what
Yesterday Trivago stock tumbled 17% on the broad market sell-off, though one analyst seems to see value in the travel stock. Guggenheim analyst Jake Fuller lowered his price target yesterday from $3 to $2, citing a steeper revenue decline due to the coronavirus outbreak and spending rationalization from key partners like Booking Holdings and Expedia. Nonetheless, Fuller kept his buy rating on Trivago for valuation reasons, and based on his price target, he sees an upside of about 33% for the stock.
Image source: Trivago.
Today investors seem to be saying also that they believe Trivago stock has been oversold after shares fell below $1.50 yesterday, trading in penny stock range. Today's gains also came as most of its travel stock peers, like Booking, Expedia, and TripAdvisor, were trading lower.
Now what
Yesterday, after hours, Booking Holdings withdrew its first-quarter guidance due to the expanding coronavirus outbreak and the uncertainty around it. Management noted, in particular, that the impact on travel in North America and Europe was getting worse. That would seem to be bad news for Trivago, as it relies on bids from companies like Booking to drive its business, and if hotel bookings are down, Trivago's revenue is likely to fall as well.
Still, there is an argument that the stock is oversold and has become a value play, as it now trades at just six times adjusted EBITDA. Though Trivago faces other challenges, the travel economy will bounce back eventually, and Trivago is likely to benefit from a rising tide when it does.
