After being hurt by changes in the underlying structure of Google search protocols, Trivago NV – ADR (NASDAQ:TRVG) shares have been pasted over the last year. However, in our experience, that type of catalyst typically hurts a company tethered to Google so tightly for about 2-3 quarters at most. We may be close to working through that.
Assuming the IPO was priced remotely well, we would expect a return to the IPO pricing range around $10-12/share as not out of the question.
Trivago NV – ADR (NASDAQ:TRVG) trumpets itself as a company that, together with its subsidiaries, operates as a hotel search platform.
It offers online meta-search for hotels by facilitating consumers’ search for hotel accommodation through online travel agents, hotel chains, and independent hotels. The company provides access to its platform through 55 localized Websites and apps in 33 languages.
As of December 31, 2017, its hotel search platform offered access to approximately 1.8 million hotels and other types of accommodation worldwide. The company was founded in 2005 and is headquartered in Düsseldorf, Germany. trivago N.V. is a subsidiary of Expedia, Inc.
According to company materials, “trivago N.V. (TRVG) is a global hotel search platform. We are focused on reshaping the way travelers search for and compare hotels, while enabling hotel advertisers to grow their businesses by providing access to a broad audience of travelers via our websites and apps. Our platform allows travelers to make informed decisions by personalizing their hotel search and providing access to a deep supply of hotel information and prices.”
Not Chronically Disabled
Travel stocks are generally tethered to big, topline economic data. And Q3 stands to be the best overall quarter for the US economy of the cycle thus far due to the zone of maximum impact for fiscal stimulus measures in the US.
Assuming strong Q3 GDP numbers, if TRVG stops missing numbers, the upside potential here could be quite interesting.
This is a secular growth story, rather than a cyclical story. And it may be sitting at deep value levels at present, which suggests investors have a relatively safe opportunity for highly speculative capital.
As a signal for how the hedge fund community views this, consider that Par Investment Partners disclosed a 34.5% active stake in the company back in September, which was a striking increase in exposure.
At the end of the day, we would expect the company to have put together some reasonably strong data for Q3 and perhaps express some strong views about Q4 and H1 2019. But they have to execute.
At this point, the market has been lulled into a sense of futility with a company that is likely not a chronically disabled performer. Earnings hit on Wednesday morning. And if they signal a shift to hitting the numbers, then we may have an interesting story beginning to emerge.
Trivago NV – ADR (NASDAQ:TRVG) pulled in sales of $279.9M in its last reported quarterly financials, representing top line growth of -16.1%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($115.2M against $119M, respectively).