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Category: Stock Market and Trivago
Date: 19 May 2020 Stock Price: $1.66 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Trivago, a online hotel and accommodation booking site. The group like most others in the industry has been hit hard by the Covid-19 pandemic.
the COVID-19 outbreak is having a significant negative impact on our business in all our segments, and in response, we have taken a number of steps to maintain our cash liquidity and relationships with our advertisers " |
About Trivago
German transnational technology company specializing in internet-related services and products in the hotel, lodging and metasearch fields. The United States travel company Expedia Group owns a majority of the company's stock.
Overview of Trivago's 1st quarter 2020 earnings report
- Net Revenue: €138.803 million (up from €108.962 million for the same quarter of the previous year
- Revenue decreased by 33.1% over the last 12 months
- Costs and expenses: €355.055 million (up from €195.590 million for the same quarter of the previous year)
- Costs and expenses increased by 81.5% over the last 12 months (largely due to impairment of goodwill to the tune of €207 million)
- Net loss: -€214.266 million (down from profit of €7.828 million for the same quarter of the previous year)
- Diluted loss per share: -€1.18 (down from €0.043 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 181 million (up from 181 million for the same quarter of the previous year)
- Cash and cash equivalents: €191.423 million
- Cash and cash equivalents per share: €1.06
- Cash and cash equivalents makes up 63.8% of Trivago's market capital
- Cash and cash equivalents makes up 21.7% of Trivago's total assets
- Accounts receivable: €36.802 million
- Accounts receivable makes up 4.2% of Trivago's total assets
- Stockholders equity of Trivago: €684.086 million
- Stockholders equity per share for Trivago €3.77 ($4.12 a stock)
- So Trivago is trading at 0.41 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- For some perspective the average price to book value that firms in the S&P 500 trade at is 3.7. Read more about the S&P 500 here
Trivago's management commentary on their 1st quarter 2020 earnings report
Dear shareholders, As outlined in our letter from April 27, 2020, the COVID-19 outbreak is having a significant negative impact on our business in all our segments, and in response, we have taken a number of steps to maintain our cash liquidity and relationships with our advertisers. At this point in time, it is still uncertain what exactly the impact of COVID-19 will have on the future of the online travel industry. One thing is already clear though – the industry will change significantly, and it will be important for us to constantly review the implications of this epidemic on our customers’ future behavior, our industry’s structure and competitive dynamics. Based on our current assumptions for 2020, we expect our full year revenue to be less than half of our full year 2019 revenue and to experience a significant Adjusted EBITDA loss.
COVID-19 – Impact on the future of the online travel industry When the COVID-19 outbreak eases and travel and mobility restrictions are gradually lifted, we believe travelers will remain insecure about making long distance travel commitments for quite some time. As international travel restrictions will likely persist for the near future, we believe domestic and nearshore travel will become a more attractive alternative for many travelers. The worsening economic conditions are likely to increase the price consciousness of travelers going forward, making our deals driven product even more relevant. Looking at travel opportunities, we anticipate that the safety restrictions implemented will limit the attractiveness of traveling for some time. The potential length of the lock-down by region, the government support offered to the various parts of the industry and the potential for re-emerging waves of COVID-19 in some countries make it very difficult for us to predict the impact of the pandemic on the structure of supply. In particular government support to businesses that suffer from low occupancy while restrictions persist will be important to rebuild the industry going forward. However, it seems likely that large industry participants will have easier access to funding and as a result, will likely be able to resume business more quickly, and therefore will gain market share. Overall, industry participants with a weaker financial position or less favorable competitive positions may face financial distress, leading to a generally higher level of consolidation in the industry. We anticipate that we and other providers of performance marketing will have a more consolidated advertiser structure. We expect our marketplace to be negatively impacted for at least the next 6-12 months. On the other hand, we expect the competitive dynamics in SEM auctions to soften as major industry participants are likely to structurally reduce their spend in the channel.
COVID-19 – Impact on the future of the online travel industry When the COVID-19 outbreak eases and travel and mobility restrictions are gradually lifted, we believe travelers will remain insecure about making long distance travel commitments for quite some time. As international travel restrictions will likely persist for the near future, we believe domestic and nearshore travel will become a more attractive alternative for many travelers. The worsening economic conditions are likely to increase the price consciousness of travelers going forward, making our deals driven product even more relevant. Looking at travel opportunities, we anticipate that the safety restrictions implemented will limit the attractiveness of traveling for some time. The potential length of the lock-down by region, the government support offered to the various parts of the industry and the potential for re-emerging waves of COVID-19 in some countries make it very difficult for us to predict the impact of the pandemic on the structure of supply. In particular government support to businesses that suffer from low occupancy while restrictions persist will be important to rebuild the industry going forward. However, it seems likely that large industry participants will have easier access to funding and as a result, will likely be able to resume business more quickly, and therefore will gain market share. Overall, industry participants with a weaker financial position or less favorable competitive positions may face financial distress, leading to a generally higher level of consolidation in the industry. We anticipate that we and other providers of performance marketing will have a more consolidated advertiser structure. We expect our marketplace to be negatively impacted for at least the next 6-12 months. On the other hand, we expect the competitive dynamics in SEM auctions to soften as major industry participants are likely to structurally reduce their spend in the channel.
Strategic implications for trivago and outlook
While some European countries have taken first steps back towards normality with some relaxations to the existing shutdown, we believe a cautious and gradual approach will be important to avoid a “second wave” of infections. Rebuilding in strides, a safe travel experience and our customers trust in traveling should be the main objective of our industry for the months to come. As a result, we expect to experience only slowly recovering volumes, which will be depressed by the economic impact of the crisis, limited and restricted leisure offerings in destination and the only gradual return of perceived safety in traveling. In addition, travelers’ greater focus on free-cancellable rates and advertisers’ exposure to overall higher cancellation levels may negatively affect our monetization levels going forward.
We expect 2021 revenue levels to be below precrisis levels in any likely scenario. We are preparing for this new reality in the online travel industry in the following ways:
• We believe that we have the opportunity to become much more relevant to travelers, encouraging interaction with our site on a weekly and eventually even on a daily basis. As we believe local and nearby travel will become more attractive, we are working on adapting the product to inspire short-term trips that can be planned spontaneously. By increasing the relevance of the product and adding more features targeting our most loyal users, we aim to increase our retention and reduce our marketing intensity in the future.
• We are planning to support this pivot in our value proposition with a strong focus on branded marketing communication, our major strength and a key differentiator of our brand.
• It is not unlikely that we will de-emphasize performance marketing campaigns going forward. The first indications of our large-scale tests in the first quarter of 2020 showed that there is ample room to increase the efficiency of our performance marketing spend. With returning volumes we are planning to verify our findings and conclude on a long-term direction later in the year.
• In the first quarter of 2020, we tested two new features on our website: sponsored listings and display advertisement. We believe that they will offer advertisers an interesting supplement to our traditional auction and allow for tailored brand communication and more brand differentiation. We continue to iterate in this area of supplemental monetization and expect to test additional advertising formats going forward.
• We believe that we should offer a lower risk participation method for our advertisers in our marketplace, permitting them to limit the risk of paying us for bookings that are ultimately cancelled. We have started to assess the best way to do so and expect to be able to offer solutions until end of this year.
• In addition, we continue to focus on the execution of the strategy we communicated earlier this year. Our key focus for the remainder of the year will be to implement these changes to our platform and product to prepare for the new normal in all aspects of our business.
While some European countries have taken first steps back towards normality with some relaxations to the existing shutdown, we believe a cautious and gradual approach will be important to avoid a “second wave” of infections. Rebuilding in strides, a safe travel experience and our customers trust in traveling should be the main objective of our industry for the months to come. As a result, we expect to experience only slowly recovering volumes, which will be depressed by the economic impact of the crisis, limited and restricted leisure offerings in destination and the only gradual return of perceived safety in traveling. In addition, travelers’ greater focus on free-cancellable rates and advertisers’ exposure to overall higher cancellation levels may negatively affect our monetization levels going forward.
We expect 2021 revenue levels to be below precrisis levels in any likely scenario. We are preparing for this new reality in the online travel industry in the following ways:
• We believe that we have the opportunity to become much more relevant to travelers, encouraging interaction with our site on a weekly and eventually even on a daily basis. As we believe local and nearby travel will become more attractive, we are working on adapting the product to inspire short-term trips that can be planned spontaneously. By increasing the relevance of the product and adding more features targeting our most loyal users, we aim to increase our retention and reduce our marketing intensity in the future.
• We are planning to support this pivot in our value proposition with a strong focus on branded marketing communication, our major strength and a key differentiator of our brand.
• It is not unlikely that we will de-emphasize performance marketing campaigns going forward. The first indications of our large-scale tests in the first quarter of 2020 showed that there is ample room to increase the efficiency of our performance marketing spend. With returning volumes we are planning to verify our findings and conclude on a long-term direction later in the year.
• In the first quarter of 2020, we tested two new features on our website: sponsored listings and display advertisement. We believe that they will offer advertisers an interesting supplement to our traditional auction and allow for tailored brand communication and more brand differentiation. We continue to iterate in this area of supplemental monetization and expect to test additional advertising formats going forward.
• We believe that we should offer a lower risk participation method for our advertisers in our marketplace, permitting them to limit the risk of paying us for bookings that are ultimately cancelled. We have started to assess the best way to do so and expect to be able to offer solutions until end of this year.
• In addition, we continue to focus on the execution of the strategy we communicated earlier this year. Our key focus for the remainder of the year will be to implement these changes to our platform and product to prepare for the new normal in all aspects of our business.
Trivago (NASDAQ: TRVG) stock price history
The image below, obtained from Google, shows the stock price history of Trivago (NASDAQ:TRVG) since their listing. And it's been a very volatile and unhappy time for Trivago stockholders. At their listing in December 2016 they were trading around $11.80 a stock and they are currently trading at $1.66 a stock. That is a massive loss of - 85.9% suffered by stockholders of Trivago.
The stock of Trivago is trading at very close to its 52 week low of $1.30 and is far away from their 52 week high of $5.38 which to us is a clear indication that the short term sentiment and momentum of Trivago's stock is very negative at this point.
The stock of Trivago is trading at very close to its 52 week low of $1.30 and is far away from their 52 week high of $5.38 which to us is a clear indication that the short term sentiment and momentum of Trivago's stock is very negative at this point.
Recent coverage of Trivago
The extract below discusses investing in Trivago as obtained from SimplyWall.st
Anyone researching trivago N.V. (NASDAQ:TRVG) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that ‘Volatility is far from synonymous with risk’, beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market
Anyone researching trivago N.V. (NASDAQ:TRVG) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that ‘Volatility is far from synonymous with risk’, beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market
So lets compare the stock price of Trivago and Booking Holdings over the last 3 years
The image below shows the stock price performance of Trivago (NASDAQ: TRVG) and Booking Holdings (NASDAQ: BKNG) sover the last 3 years. Over the period in question the stock of Booking Holdings has easily outperformed the stock of Trivago, with Booking Holdings declining by -17.67% while Trivago declined by -91.1%. For more stock comparisons see our stock performance comparison page.
Trivago (NASDAQ: TRVG) latest stock valuation
So what is Trivago (NASDAQ: TRVG) stock worth based on the release of their 1st quarter 2020 earnings report? Based on their earnings reported and the fact that they are loss making at this point we have no choice but to value them at their stockholders equity per share which is $4.12. We therefore believe that the stock is undervalued however we would warn investors before investing in Trivago due to their very dim prospects for the foreseeable future.
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $4.12. So a good entry point into Trivago stock would be at $3.70 or below. But as we mentioned above an investment in Trivago stock comes with significant risk and we would not advise investing money you cannot afford to lose in Trivago. Their stock at this point should only be seen as a speculative punt.
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $4.12. So a good entry point into Trivago stock would be at $3.70 or below. But as we mentioned above an investment in Trivago stock comes with significant risk and we would not advise investing money you cannot afford to lose in Trivago. Their stock at this point should only be seen as a speculative punt.
Next earnings release of Trivago
It is expected that Trivago will release their 2nd quarter 2020 earnings report in mid August 2020