Trivago Tanks Following Updated Guidance

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Trivago N.V. (NASDAQ: TRVG) watched its shares get crushed on Wednesday after the company updated its full-year guidance. Unfortunately, Trivago is projecting results to be a lot softer than previously expected and investors were not having this.

The anticipated negative impact on revenue per qualified referral (RPQR) that management had previously discussed on its second quarter 2017 earnings call has now become more significant than expected.

As a result, Trivago has “algorithmically” pulled back its performance marketing activities more than previously anticipated, which has resulted in a further slowdown in traffic and revenue growth from those channels.

According to the company’s release:

Due to the speed with which the above RPQR slowdown unfolded we were unable to pull back planned television advertising spend quickly enough to prevent overspend. As a consequence, we will have lower Return on Adverting Spend (ROAS) in July and August and adjusted EBITDA margins in those months have been negatively impacted. Note that we do expect ROAS to stabilize over time with an adjustment of brand marketing expenses.

Consensus estimates from Thomson Reuters call for $0.08 in earnings per share (EPS) and $1.36 billion in revenue for the full year. Comparatively, the same period of last year had EPS of $0.08 and $898.66 million in revenue.

In terms of the numbers, Trivago now expects annual revenue growth to be around 40% and adjusted EBITDA to be lower than in 2016 but will still remain positive. For a more concrete number, the firm is predicting just over $1.25 billion in revenue, which falls short of estimates.

Excluding Wednesday’s move, Trivago was actually up 27% year to date. However, after this move the stock is only barely positive.

Shares of Trivago were last seen down 22% at $11.56 on Wednesday, with a consensus analyst price target of $20.76 and a 52-week range of $10.43 to $24.27.