Online travel and hotel booking platform Trivago (NASDAQ:TRVG)) stock has been a forgotten play further swept under the rug during the pandemic. As the race for COVID-19 vaccine FDA and European approvals near the finish line, travel and leisure related stocks are again seeing revitalized momentum. Travago shares are still underperforming the benchmark SPDR S&P 500 (NYSE:SPY)) leaving more room to the upside. The Company estimates the return to normalcy by the second-half of 2021. Since the markets are always thinking forward, prudent investors may start to monitor Travago shares for opportunistic pullbacks ahead of the recovery.
Q3 FY 2020 Earnings Release
On Nov. 2, 2020, Travago reported its Q3 2020 results for the quarter ending September 2020. The Company reported an adjusted earnings-per-share (EPS) loss of (-0.01 EUR) on revenues of 50.64 EUR, down (-75.8%) year-over-year (YOY). Revenue per Qualified Referral (RQP) of the Americas dropped to 1.00 EUR from 2.24 EUR, down (-55%) YoY. The Company generates a large portion of referral revenues through online travel agencies (OTA). The shares of brands affiliated with Expedia Group (NASDAQ:EXPE), the referral revenue was 22% and 29% for Q3 and nine-months ending Sept. 30, 2020. For Booking affiliates, referral revenues were 53% and 44% for Q3 and nine-months ending Sept. 30, 2020.
Core Business
The Company provides access to over 5 million hotels and accommodations through over 190 countries via 54 localized websites available in 32 languages. Travago experienced seasonal increases in volumes of travel activities after lockdown easing. Bids across marketing auctions still remain soft as COVID-19 infection increases in Europe, has created volatility again.
Conference Call Takeaways
Travago CEO, Axel Hefer, stated, “We believe that a sustainable recovery in travel is coming closer as progress and testing, vaccination and treatment are likely to show effect in 2021.” Travago CFO, Mattias Tillman, highlight that “significant improvement” in travel activity in Q3 as a result of the easing of lockdown measures. The increase in qualified referrals and RPQR was very strong. The Company was selective in marketing thus trimming operating expenses by (-32%) in the quarter. The combination of cost-cutting and improved travel activity resulted in a net loss of 2.3 million EUR and a positive adjusted EBITDA of 6.1 million EUR. The Company estimates the start of normalization with improved COVID-19 testing and vaccine approval in the second half of 2021.
Gauging the Travel and Lodging Landscape
To get an idea of how Travago may perform since they receive referral revenues connecting travelers (users) and accommodations (advertisers), it’s prudent to gauge the travel and lodging landscape to get your own perspective. This can be done by watching the price action for various segments of the industry. Investors can watch peers like TripAdvisor (NASDAQ:TRIP) and Booking Holdings (NASDAQ:BKNG) to gauge the sentiment in the sector along with airlines like United Airlines Holdings (NASDAQ:UAL) and Southwest Airlines (NYSE:LUV) and hotels like Marriott International (NYSE: NASDAQ:MAR) and Hilton Worldwide (NYSE: HLT). Travago is the cheapest stock price wise and that alone makes it attractive as percentage gains are easier to attain. On Nov. 25, 2020, Altimeter Capital discloses a 4.2% stakes in 13G filing. Keep in mind the Company projects “normalization” by the second-half of 2021 in the travel industry. Risk-tolerant investors looking for a cheap travel recovery play can watch Travago shares for opportunistic pullbacks to scale in
TRVG Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for TRVG stock. The monthly rifle chart is trying to reverse a multi-year downtrend as the stochastic attempts form a divergence bottom. The divergence bottom forms under the 20-band composed of sequential higher band crossovers, which means the monthly stochastic needs to crossover one more time and push through the 20-band. The key resistance overshoots the monthly 15-period moving average (MA) at $2.39 Fibonacci (fib) level. The weekly rifle chart triggered a market structure low (MSL) above $1.79 with a stochastic mini pup through the 20-band. The extreme upside spike sets up opportunistic pullback levels at the $2.19 fib, $1.98 fib, $1.79 fib and the $1.68 fib. The upside trajectories range from the $2.87 fib to the $5.32 fib.