Stocks rebounded somewhat Wednesday, with good news on a bipartisan agreement in Washington to raise the debt ceiling and fund the government through mid-December apparently mitigating some of Tuesday's worries over North Korea and Hurricane Irma. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both posted gains.
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Energy stocks led the market higher, with the Energy Select Sector SPDR ETF (NYSEMKT: XLE) jumping 1.6%. Retail stocks were also strong; the SPDR S&P Retail ETF (NYSEMKT: XRT) gained 1.2%.
As for individual stocks, trivago N. V. (NASDAQ: TRVG) plummeted after the company lowered its guidance for the year, while Sarepta Therapeutics (NASDAQ: SRPT) soared on positive drug trial results.
Slowing growth from Trivago worries investors
Shares of hotel search company Trivago were hammered Wednesday after the company cut guidance for revenue growth for the year from 50% to 40%, and trimmed its prediction on EBITDA, saying it would be slightly lower than 2016, but still positive. The stock plunged as much as 30% in the day, but recovered somewhat, closing down 16.3%.
The company attributed most of the change to its guidance to a change in the way the site scores search relevance, an issue management has discussed in previous quarters , but which turned out to have a greater impact than expected. The company is giving its advertisers credit for providing good user experiences to customers once they are referred to the booking site. As the hotels and booking sites have improved their user experiences, thus gaining higher position on search results, they have been able to generate the same traffic levels with lower advertising bids.
As a strategy to improve the experience for users, it's working, but that success comes at the expense of revenue growth. Profit was impacted as Trivago was not able to adjust advertising spending downward quickly enough to balance out lower sales. The Germany-based company also blamed the weak dollar, and a weak comparison with strong seasonal results in August 2016 that didn't repeat this year.
The issues would appear to be short term, but investors seemed concerned that the focus on user experience may not pay off in improved conversion rates, and that weakness during the heavy travel season may actually be a result of new competitors in the arena, a possibility that management said in a conference presentation it wouldn't rule out.
Sarepta Therapeutics reports positive clinical trial results
The stock of Sarepta Therapeutics, a biotech company focusing on rare neuromuscular diseases, soared 13.8% today after announcing positive results from an early-stage trial of a new drug for Duchenne muscular dystrophy (DMD).
Sarepta took advantage of the occasion of World Duchenne Awareness Day -- and the ringing of the closing bell on the Nasdaq exchange -- to announce the results of a study of its drug, golodirsen, in 25 boys with DMD. The subjects had a 100% response rate, based on measurements of protein levels from muscle biopsies.
The underlying cause of DMD is a mutation in the gene for producing dystrophin, a protein critical for strengthening and protecting muscle fibers. The company already has one drug, Exondys 51, that was granted accelerated approval by the FDA for use by 13% of DMD patients -- those with one specific mutation that causes the disease. The approval of golodirsen would bring its treatments to another 8% of the patient population.
Clinical benefits from Sarepta's approach have not been proved yet, even for Exondys 51, as it is unclear whether the improved levels of dystrophin in patients receiving the drugs will actually translate into improved quality of life or life expectancy. But any news that bodes well for the approach the company is taking seems to provoke a strong positive response from investors in this speculative stock.
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