Trivago: A Disappointing IPO but Outstanding Growth



Disappointing IPO

Trivago (TRVG) went public in December 2016. Though it planned to sell 28.5 million shares at $14, it ended up selling only 26.1 million shares at just $11 per share. With 347 million outstanding shares, the company was valued at $3.8 billion. This valuation has risen to ~$4.5 billion as of February 10, 2017. Trivago’s shares rose ~13% in after-market trading on February 9, after Expedia’s 4Q16 earnings, and rose 7.6% the following day.

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2016 performance

For 2016, Trivago’s revenue rose 53% YoY to $836 million. For 2015, revenue grew 59% to $535 million. Adjusted EBITDA also rose 1119% to $35 million, compared to $3 million in 2015. This high growth is what keeps investors attracted to the business.

To learn more about Trivago’s business, read A Close Look at Trivago’s Business Model.

High risks

However, the risks associated with Trivago’s business remain high. Firstly, it has a highly concentrated customer base, earnings 80% of its revenue from Priceline (PCLN) and Expedia (EXPE). Also, the business is marked with high competition. And the company is still making operating losses. The sustainability of the business and lack of profitability have remained a concern.

Earnings call

Trivago will be conducting its own conference call later this month. Rival TripAdvisor is expected to report earnings on February 16 while Priceline (PCLN) is expected to report earnings on February 27. We’ll be covering these releases, so keep visiting Market Realist’s Online Travel page.

Investors can gain exposure to Expedia by investing in the First Trust Dow Jones Internet ETF (FDN), which invests 2.7% of its holdings in Expedia. It also holds 1.9% in TripAdvisor (TRIP) but has no holdings in Priceline (PCLN) or Ctrip International (CTRP).


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