On Thursday, Citi updated its stance on trivago N.V. (NASDAQ:TRVG), a global hotel search platform, by reducing its price target to $2.20 from the prior $2.60 while keeping a Neutral rating on the stock. The adjustment follows the company's second-quarter earnings report for 2024.
The revised price target comes after trivago reported its second-quarter revenue at €119 million, marking a 5% decrease year-over-year, which was in line with consensus estimates. The decline was attributed to a combination of growth in branded revenue and persistent challenges in performance marketing.
The company's adjusted EBITDA for the quarter was reported at €(5.4) million, slightly below the consensus estimate of €(4.6) million. Increased brand advertising expenditures were partly responsible for this shortfall.
Trivago experienced a regional divergence in its performance, with Developed Europe seeing a 17% year-over-year decline in revenues. This was due to reduced performance marketing volumes, which were linked to new advertising formats on Google (NASDAQ:GOOGL). However, the Americas region showed promising signs, with a revenue increase of 12% year-over-year.
Looking forward, Citi's assessment indicates an expectation for trivago's revenue growth to turn positive in the fourth quarter as the company begins to see the benefits of its branding efforts. Additionally, trivago announced the acquisition of a 30% stake in Holisto, an AI-driven hotel rate company. This move is anticipated to enhance trivago's product portfolio.
As trivago navigates through its performance marketing challenges and ramps up its brand advertising, Citi's revised price target reflects a cautious yet stable outlook for the company's stock.
In other recent news, trivago has reported a 5% decline in Q2 revenues to €118.6 million, primarily attributed to changes in Google's ad format. Despite this setback, the company remains optimistic about a return to growth in the second half of 2024. Trivago's operating expenses increased to €127.4 million, leading to a net loss of €4.9 million for the quarter.
However, the company is focusing on brand marketing campaigns and investment in the AI-driven travel platform, Holisto, to enhance user experience and drive conversion rates. The company's management remains confident in their growth potential and expects to guide its adjusted EBITDA to breakeven levels for the full year.
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