What happened
Shares of Trivago (NASDAQ: TRVG) were climbing for the second session in a row today as the hotel metasearch company continued to attract attention from Reddit traders following its fourth-quarter earnings release last Wednesday.
As of 9:53 a.m. EST on Tuesday, the stock was up 21.2% on high-volume trading following a similar gain of 21% last Friday, even though there was no major news on the stock today.
Image source: Getty Images.
So what
Investor reaction to the earnings report was muted last Wednesday as the online travel agency said revenue plunged in the fourth quarter, as expected, but expressed some optimism about a recovery in the travel market by the second half of the year.
The stock rose 8% on the report, but then caught fire on Friday, surging on high-volume trading as it got another round of attention from Reddit traders. Trivago shares had briefly spiked on Jan. 27, one of several WallStreetBets stocks that surged that day, and nearly tripled at one point in the session. It was one of several stocks that were restricted on Robinhood and other platforms even though it has not received a lot of interest from short-sellers.
On Friday, one Reddit trader laid out a bull thesis for Trivago, getting 991 upvotes and 529 comments on the WallStreetBets post. The post argued that the company would be much leaner coming out of the pandemic and benefits from being majority-owned by Expedia, which is one of its two biggest customers, along with Booking Holdings. The poster also called the stock cheap and said it would benefit from pent-up travel demand.
Today, momentum for the stock seems to be gaining as a number of traders on Twitter touted the stock and said it would hit $5 by the end of the week.
Now what
There is a bull case for Trivago, and the company will certainly benefit from the economic reopening later this year. But those who are new to the stock should be aware that the company struggled before the pandemic, so success in its aftermath is far from guaranteed, especially when traders are pushing up the travel stock -- which has now tripled since November -- on little fundamental news.
Shares are now higher than they've been at any point since mid-2019.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings and Twitter. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.
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