On Wednesday, Mizuho Securities adjusted its outlook on Trivago N.V. (NASDAQ:TRVG), a hotel search platform, reducing its stock price target to $3.50 from the previous $4.00, while still recommending the stock as a Buy. The revision follows the company's recent performance, which has been impacted by its shift toward brand marketing performance channels.
The company's transition strategy has been identified as a short-term challenge for revenue growth, but it is expected to lead to improved user retention and sustainable revenue growth over time. This strategic shift has prompted Mizuho to revise its financial expectations for Trivago, leading to a nearly 10% reduction in the forecasted FY25E EBITDA to €26 million.
Despite the lowered top-line growth forecast and the anticipation of increased spending on brand marketing, Mizuho has decided to maintain its Buy rating for Trivago's shares. The new price target of $3.50 is based on 2x FY25E EBITDA, which is at the lower end of the stock's historical valuation range. This adjustment reflects the ongoing business transitions that Trivago is currently undergoing.
The firm's decision takes into account both the short-term implications of the marketing strategy change and the long-term potential for Trivago's growth and profitability. Mizuho's stance suggests confidence in the company's ability to navigate through the current transition and emerge with a stronger market position.
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