What happened
Shares of Trivago (NASDAQ: TRVG) have plummeted today, down by 15% as of 1 p.m. EDT, after broader markets tanked. The novel coronavirus outbreak and a drop in oil prices are stoking fears of a global recession. Like many travel companies, Trivago faces increased risks from the COVID-19 respiratory illness as broad demand for transportation gets crushed.
So what
As consumers curb unnecessary travel in response to the outbreak, Trivago's hotel-booking platform is starting to feel the negative impacts. On the conference call discussing fourth-quarter results last month, management conceded that it was unclear just how much of a hit the company would take.
Image source: Trivago.
CEO Axel Hefer said:
Generally speaking, it is very hard for us to quantify what the exact impact of the coronavirus is. We do see a drop in revenue specifically in Asian-Pacific countries. So that's the region that is most effected. But again it is very hard for us or anyone also to forecast how this will develop.
Hefer also added that "there is some general softness in Europe and rest of the world overall."
Now what
Trivago offered a little more detail in its corresponding 20-F annual report, noting that the outbreak's impact on demand could also hurt its advertising business. "We also believe that the Wuhan coronavirus outbreak will have a negative impact on our global business volumes in 2020, which may also impact the way our advertisers bid on our marketplace," the company wrote.
Management opted not to provide financial guidance for 2020, in part due to uncertainties around the crisis.
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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.
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