Trivago NV – ADR (TRVG) Gets a Price Target Lowered Following Analyst Day

While Wells Fargo's Peter Stabler pinpoints some positives for Trivago's story, the analyst is dialing down his expectations on a "muted" perspective of short-term trends.

Trivago NV – ADR (NASDAQ:TRVG) shares are rising almost 4% after the German hotel search platform earned an upgrade from Deutsche Bank, another bull backing the tech player. However, not everyone on Wall Street would agree with Deutsche Bank’s newfound confidence.

Wells Fargo analyst Peter Stabler is not only “more cautious” on profitability for the company next year after yesterday’s analyst day held in New York City, but the analyst even anticipates the Street’s EBITDA estimates could wind down lower.

Playing it safe on a short-term financial outlook that continues to be “muted,” especially considering a “significant pullback by PCLN, which had been TRVG’s largest, customer,” the analyst reiterates a Market Perform rating on TRVG stock while cutting the price target from $9 to $7.50, which implies a close to 9% upside from current levels. (To watch Stabler’s track record, click here)

Stabler notes, “While CFO Axel Hefer presented a largely qualitative view of 2018 financials and suggested that 2018 revenue consensus was likely in the ‘right’ range, he indicated that the company’s key focus will be revenue growth, noting that the experience of 2017 has demonstrated the strategic importance of scale, which suggests to us that the current Street consensus EBITDA forecast of $2MM may remain somewhat elevated.”

Yet, not all looks concerning to Stabler, who in turn highlights signs of “stabilized customer concentration dynamics” that have him gaining positivity. Specifically, the analyst points to TRVGO’s biggest customer, this time offering an encouraged takeaway, as “trends with PCLN have stabilized, given mgmt commentary to that effect (i.e., the updated view of PCLN’s revenue share in 4Q’17 to date presented yesterday was consistent with the view presented at the time of 3Q’17 earnings, roughly one month into the quarter) and what we view as a credible analysis from TRVG mgmt of the market dynamics leading to PCLN’s pullback.”

On a final note, Stabler concludes with some more silver lining, believing that just as he noticed with management’s comments at Wells Fargo’s Tech Summit this week, the TRVG team looks to “chain hotels and alternative accommodations as sources of opportunity,” specifically prospects that could yield “revenue diversification.” Down the line, TRVG intends to “seek to integrate additional supply partners.”

Glancing ahead to 2018, the analyst maintains his projection for TRVG’s revenue to hit $1.13 billion and EBITDA to land at ($10 million).

TipRanks shows a Street divided on the German hotel search platform, with just 2 of 7 analysts polled in the last 3 months bullish on Trivago stock, a majority of 4 surveying from the sidelines, and 1 bearish on the stock. However, when considering analyst expectations, the 12-month average price target of $8.30 boasts a nearly 21% return potential.

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