Trivago's Tribulations Not Likely Negative For Priceline, Expedia

Shares of

Trivago NV - ADRTRVG

were hard hit Wednesday after the European-based hotel search company issued a guidance warning. The company

cautioned investors that its revenue growth rate for 2017 will be 40 percent year over year, which marks a deceleration from the prior guidance of 50-percent growth. The main question from this guidance warning is what impact will Trivago's outlook have on the rest of the online travel agency space? Analysts at Bank of America answered this question and believe that Trivago's woes are company specific and not indicative of broader weakness across the entire sector. Bank of America's Nat Schindler downgraded Trivago's stock rating from Buy to Neutral with a price target lowered from $22 to $14 as the company's guidance warning indicated it is less competitive in performance marketing channels that have a negative impact on traffic.

Trivago's warning can also be attributed to the "unwinding of the relevance assessment" which previously served as a reason for advertisers to pay a premium to the company, the analyst noted. But at the same time advertisers were making improvements to their own sites, which imply that premium bids were reduced and had a larger than expected impact on Trivago's traffic monetization and growth.

Also important to note, Trivago didn't cite any travel related demand issues in its guidance warning, Schindler also stated. As such, there is no change to the analyst's prior positive stance on Trivago's peers including Priceline Group Inc PCLN and Expedia Inc EXPE.

At last check, shares of Trivago were down 4.68 percent at $11.90.

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