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Earnings Release: Here's Why Analysts Cut Their trivago N.V. (NASDAQ:TRVG) Price Target To €1.53

trivago N.V. (NASDAQ:TRVG) shareholders are probably feeling a little disappointed, since its shares fell 3.8% to US$1.28 in the week after its latest quarterly results. It looks like weak result overall, with ongoing losses and revenues of €61m falling short of analyst predictions. The losses were a relative bright spot though, with a per-share (statutory) loss of €0.01 being 67% smaller than what the analysts had presumed. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on trivago after the latest results.

View our latest analysis for trivago

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Taking into account the latest results, the current consensus from trivago's 13 analysts is for revenues of €493.0m in 2021, which would reflect a major 32% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 96% to €0.025. Before this latest report, the consensus had been expecting revenues of €494.7m and €0.03 per share in losses. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a losses per share in particular.

Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 5.3% to €1.53. It looks likethe analysts have become less optimistic about the overall business. 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 €2.32 per share, while the most pessimistic values it at €1.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. The analysts are definitely expecting trivago's growth to accelerate, with the forecast 32% growth ranking favourably alongside historical growth of 0.7% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect trivago to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. 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 in mind, we wouldn't be too quick to come to a conclusion on trivago. Long-term earnings power is much more important than next year's profits. We have forecasts for trivago going out to 2024, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for trivago that you need to take into consideration.

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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