Please ensure Javascript is enabled for purposes of website accessibility

Why Trivago Shares Plunged 12.9% on Monday

By Travis Hoium - Mar 23, 2020 at 3:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The travel sell-off continues.

What happened 

Shares of internet travel company Trivago (TRVG -2.63%) fell as much as 12.9% in trading Monday as investors questioned how much the company's business will suffer as the COVID-19 outbreak spreads. At 2:40 p.m. EDT today, shares were still down 9.5%, and are down 39.2% in the last month. 

So what

Trivago's shares plunged as the market realizes that the COVID-19 shutdown may last a lot longer than originally expected. Over the weekend, the president of the St. Louis Fed, James Bullard, said that unemployment may reach 30% and GDP could drop 50% if the pandemic continues. Meanwhile, Gov. Andrew Cuomo of New York said the pandemic could last nine months. 

Person clicking on blue booking button on computer.

Image source: Getty Images.

If the economy is hit that hard, it wouldn't be surprising to see the travel industry suffer for quite awhile as well. The problem for Trivago is that it doesn't have much cushion to absorb a drop in revenue and may soon start reporting big losses if revenue drops. 

TRVG Revenue (TTM) Chart

TRVG Revenue (TTM) data by YCharts.

Now what

The reality is that no one knows how bad the travel business will be even a few weeks from now, so investors are jumping ship and looking for safer areas in the market. One thing to watch with Trivago is its operating leverage and how quickly losses begin to mount. Investors should get a good feel for how quickly operations fell off after the next earnings report, which will be out in early May. Until then, travel stocks are in a tough spot in the market. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Trivago Stock Quote
$1.48 (-2.63%) $0.04

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.