Earnings Release: Here's Why Analysts Cut Their trivago N.V. (NASDAQ:TRVG) Price Target To US$3.54

trivago N.V. (NASDAQ:TRVG) last week reported its latest yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were in line with expectations, at €485m, while statutory losses ballooned to €2.40 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for trivago

Following last week's earnings report, trivago's nine analysts are forecasting 2024 revenues to be €492.4m, approximately in line with the last 12 months. Per-share statutory losses are expected to explode, reaching €0.11 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of €517.3m and earnings per share (EPS) of €0.058 in 2024. The analysts have made an abrupt about-face on trivago, administering a minor downgrade to to revenue forecasts and slashing the earnings outlook from a profit to loss.

The average price target fell 16% to US$3.54, implicitly signalling that lower earnings per share are a leading indicator for trivago's valuation. 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. The most optimistic trivago analyst has a price target of US$6.41 per share, while the most pessimistic values it at US$2.25. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's also worth noting that the years of declining revenue look to have come to an end, with the forecast stauing flat to the end of 2024. Historically, trivago's top line has shrunk approximately 15% annually over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 9.8% per year. Although trivago's revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for trivago dropped from profits to a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for trivago going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for trivago that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.