trivago N.V. (NASDAQ:TRVG) Analysts Just Slashed This Year's Estimates

Market forces rained on the parade of trivago N.V. (NASDAQ:TRVG) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about trivago recently, with the stock price up a remarkable 11% to US$2.67 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After this downgrade, trivago's nine analysts are now forecasting revenues of €310m in 2021. This would be a substantial 24% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 96% to €0.029. Yet prior to the latest estimates, the analysts had been forecasting revenues of €404m and losses of €0.011 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for trivago

Analysts lifted their price target 21% to €1.90, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on trivago, with the most bullish analyst valuing it at €2.70 and the most bearish at €1.29 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that trivago is forecast to grow faster in the future than it has in the past, with revenues expected to grow 24%. If achieved, this would be a much better result than the 3.0% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 15% next year. So it looks like trivago is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of trivago.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for trivago going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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