I chose Trivago N.V. (TRVG) was my Top Pick for 2021 at the start of the year. At that time, the shares were trading at $2.15; today, they are up 80%, notes Nancy Zambell, editor of Financial Freedom Daily.
Trivago was a post-pandemic play. With signs that COVID-19 was slowly making its way out of the world, it made sense to believe that all the things we couldn’t do during the coronavirus plague — like eating out and traveling — would gear up immediately once the pandemic eased. And that is exactly what has happened.
The World Travel & Tourism Council reported that, in 2020, the sector lost nearly $4.5 trillion and 62 million jobs. And airlines alone lost $126 billion. But that is in the past. According to ustravel.org, “nearly nine in 10 American travelers have plans to travel in the next six months.”
The dregs of the pandemic continued to weigh on Trivago’s results in the first quarter, with revenues down 73%. However, the company is much more optimistic about the second half of the year.
Already, Trivago has seen qualified referrals in the U.S. rise from 30% of 2019 levels in January to 70% in April. The company reported that while international travel is still weak—due to lockdowns—trips to beach and local destinations were increasing.
During the pandemic, Trivago also took steps to shore up its bottom line, reducing employee costs by about 7 million euros in the first quarter, and also cutting non-marketing costs by 37%.
As well, it worked on some product innovations, including changing its pay from partners in its bidding auctions to bookings rather than clicks. And the company improved user interaction with its travel platform.
Lastly, Trivago bought weekend.com, which is now being used for its trivago Weekend, a product that offers recommendations for local destinations.
For the second quarter, Wall Street expects Trivago to post revenues of $85.9 million, with a loss of $0.03 per share. In 2022, it’s expected that the company will return to profitability. I look for the shares to keep edging up; my price target is $4.50.
