Hotel search platform company Trivago NV - ADR TRVG reported mixed first-quarter results, but two analysts are sticking with a bullish stance.
Mizuho: Challenges Ahead
Trivago's first-quarter revenue fell short of expectations and was lower by 20 percent year-over-year, Mizuho Securities' James Lee said in a research report. EBITDA exceeded expectations as management continues to prioritize profit and this trend should continue as management lifted its 2019 EBITDA guidance 8 percent above consensus estimates.
The company cut sales and marketing spend more aggressively in the quarter at 37 percent year-over-year versus -30 percent in the prior quarter.
During the quarter, OTA spending was incrementally worse with Booking BKNG's spending down 22 percent and Expedia EXPE's spending down 24 percent. The analyst said Expedia needs to "step up" its spend to better communicate its new properties although this scenario will become less likely as online travel agencies focus on profit over their top line.
Lee maintains a Buy rating on Trivago's stock with a price target lowered from $6 to $5.25.
Guggenheim: EBITDA Upside
Guggenheim's Jake Fuller turned bullish on Trivago's stock ahead of the earnings report based on expectations of ongoing reductions to advertising and EBITDA upside without a notable impact to revenue. The earnings was consistent with the new bullish thesis as ad spend was 37 percent lower but revenue was down by 20 percent.
Trivago's management kept its 2019 EBITDA outlook unchanged and this could be viewed as a conservative move, according to the analyst. The research firm's EBITDA estimates for the full year were increased from 66 million euro to 83 million euro while ad spend should move from 75 percent of revenue to 73 percent.
Trivago should see revenue growth of 6-7 percent in the back half of 2019 due to an easy comp and management's comments advertising spend won't rise. Fuller maintains at Buy with a $5.50 price target.
Shares of Trivago were trading lower by nearly 6 percent Thursday afternoon.
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