Travelzoo Inc (NASDAQ:TZOO)

CAPS Rating: 2 out of 5

Travelzoo advertises flights, hotels, and other travel deals online and by email.


Player Avatar TMF1000 (99.71) Submitted: 5/19/2011 12:29:06 PM : Outperform Start Price: $69.27 TZOO Score: -58.71

TZOO reported a loss of $0.85 in the quarter, but this was due to a tax settlement with the state of Delaware. They would have made $0.37 up from $0.15 had it not been for that one time charge. I think the drop was an overreaction, but the adjusted valuation is high, so investors are probably getting a bit scared to hold it. So it will be volatile. I purchased shares, so I waited two days for the pitch. I bought a small position, not like the mjuch larger one for USNA. USNA purchase was a trading position supplementing my old long-term position. TZOO position is a long-term never touch position. I plan on adding at better value points over time.

I am always looking for super growth stories. I think TZOO could be one of those stories, though it is really too early to know for sure. So as always I am easing into the position. The adjusted earnings are $1.02 and I think that is good, but the valuation is high, so I expect a lot of volatility. I am OK with that.

Earnings cannot support the present price presently, but if they keep growing it will. I can't really lose. If the story keeps the stock going up, my long-term position will grow. If investors get scared of waiting the price will drop and I will add cheap shares to my position. This is the way I invest - I sleep well at night while adding great growth stories. For those that pan out, the returns are incredible. But I don't jump in quickly - I ease into them over time. I encourage people to ease into great growth stories even if the valuation is high. If the Company turns out to be another super growth company a little is all one needs. If it fails to do well, a little is all we will want. I have confidence in the story, though the valuation is high. I can be patient with my initial small position.

They have $52 million in cash and no debt: TTM cash flow is $1.43 giving them a yield 2.1% - not cheap. PE Is 67.91 expensive. But the story is very intersting.

TravelZoo market cap is about 1.19 billion.

This isn't a travel agency like Priceline. They publish deals - they make money through advertising. They have 22 million subscribers. They just started making local deals. This is a nearly an untapped market. All growth stories are scary in the beginning, but this one looks very interesting. The local deal project is just in 30 cities so far - I think this represents some excellent growth potential if successful.

They are more like Groupon. Analyst estimate Groupon to be worth $10 to $20 billion. Groupon plans an IPO - only a lucky few will get shares. I believe The Groupon ipo will be a good one like today's LINKed. TZOO will go up on a successful Groupon offering. It may not be as good as holding Groupon shares, but the sympathy rise should be good for investors of TZOO. If TZOO revenues rise on the local deal project, this could be a much larger company in time even without the successful Groupon IPO.

I believe the price drop was overdone and based on short-term valuation. I believe the long-term story and the potential to rise on the Groupon ipo are good reasons to buy at the present discount from its $103.80 52 week high.

Report this Post 4 Replies
Member Avatar RRobertsmith (55.73) Submitted: 6/7/2011 10:43:14 AM
Recs: 1

Another irritating ad company that is about to "take one for the team" as the recession worsens, have you seen the guy pitching insurance on you tube with the gommer pile accent? Yeach, more subsribers fewer and fewer sales.....bad marketing and very bad advert. (disclosure, I am short this stock as of yesterday and am thumbs down in my Motley Fool caps).

Member Avatar johnvanjohn (< 20) Submitted: 6/23/2011 2:53:38 PM
Recs: 0

Great info...Thanks ! I hold a position in this company and feel very comfortable with it...I bought in at $46 and sold at 79....wish I had held a little longer but that was my sell point...bought back in at 54 and change and think this will hit the 80's by late July !

Member Avatar Mliaom (40.62) Submitted: 9/26/2011 11:16:06 AM
Recs: 2

Hi Tom, Could we get your latest thoughts on TZOO. Are you looking at this as "Broken Thesis" and too many rah rah companies offering the same thing or TZOO is cut above with their excellent management and this is a buying opportunity. I personally think we will know more after Groupon IPO (whenever that might be). Could TZOO be a buyout target for GOOG after their strikeout with Groupon? Thanks in advance for your thoughts.

Member Avatar Mliaom (40.62) Submitted: 10/6/2011 9:58:49 AM
Recs: 2

Hi Tom, TZOO has been beaten down way too much. Was it all due to Rev miss in the past quarter? They are expanding into new territories fast. I would love to get your latest take. Please. Thanks. Tony

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