| Stock (Symbol) | Stock Price | |
Travalzoo (TZOO) |
$45 |
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| Data is as of | Expected to Report | Sector |
March 15, 2011 |
Apr 25 |
Retail & Travel |
| Sharek’s Take | ||
Travelzoo is a new addition to the Growth Portfolio and Aggressive Growth Portfolio. The company provides travel deals on the Internet, but is not a travel agency or online travel agent. Its an advertising company for more than 2000 travel companies like Avis, Royal Caribbean, Hilton Hotels and Walt Disney Parks & Resorts. Travelzoo is known for the Travelzoo Top 20, a weekly list of the company’s best travel deals, selected in 24 offices around the world. Travelzoo’s Top 20 gets emailed to 22 million free-subscribers (including me). You can sign up for the email here.
Travelzoo is expanding into restaurant and entertainment deals, which is a catalyst for a whole new area of profitability. Local Deals are discounts on restaurants and entertainment similar to those Groupon issues. I was an early buyer of Groupons and now feel Travelzoo has the best discounts for restaurants in NYC. Also, I’m of the belief Groupon takes 50% of the revenue once a deal is sold. TZOO has indicated it takes a 30-40% cut. More on what kind of deals TZOO is offering on page three of last month’s Growth Stock Newsletter. |
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| One-Year Chart | ||
 Travelzoo has been knocking the lights out for almost a year now, and this chart makes me think we should have bought the stock sooner. But travel bounced back in 2010 from an awful 2009 so these percentages are artificially high. Note profits dipped in 2007-2010 and this year is the first year in five that TZOO should have record profitability.TZOO’s P/E of 42 means the stock is not on sale. This growth story has a growth stock price tag to it. The market is in a correction, and TZOO has corrected and is already bouncing back. This stock is showing its a big-time leader in the stock market right now by rising before the market does. |
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| Earnings Table | ||
 TZOO is an advertiser like Google and has profits up 156% last quarter on a combination of 20% revenue growth and a 17% increase in cost-per-click.The company beat by three cents last quarter but the beats were better earlier in the year. Yes, I should already be owning TZOO. I messed up. 2011 profit estimates increased around 10%, not much here. I do love the fact profits are expected to rise 36% this year and 36%. next year. I feel analysts aren’t bullish enough on Local Deals deals and TZOO could beat — or even crush — these annual estimates. TZOO did $2.5 million in Local Deals in the 4th quarter of 2010 and should do $2.5 million per-month this year–in my opinion (analysts think $1.25 mil per mo). Quarterly estimates look solid, especially the next couple of quarters. |
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| Fair Value | ||
 TZOO’s P/E is already 42 and I think it can rise to 50. Still, that doesn’t give much upside to fair value this year. |
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| Ten-Year Chart | ||
 TZOO was lights-out in 2004, going from $9 to $95. For the record I called the top day of this chart to my sales manager at the time (he owned the stock). This was a clear climax-top. The 2006 high of $53 was made as the company made $1.01 that year. Next year TZOO is expected to make $1.48. A similar valuation would take this stock from $45 to $77 (+71%). The 2012 Fair Value (above) was $74 so $74-$77 seems reasonable. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
8 of 22 |
Travelzoo has the ability to surprise analysts with the success of Local Deals. Frankly, I think most researchers are missing the boat here and won’t be surprised if the company blows away estimates.
TZOO is ranked 8th of 22 stocks in the Growth Portfolio Power Rankings. In this portfolio I like to keep some energy stocks above TZOO because we are in a stock market correction and 2011 is the year of energy stocks. TZOO is raked 3 of 10 in the Aggressive Growth Portfolio Power Rankings because the stock is very strong and has the ability to make a big move higher right away.
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Aggressive Growth Portfolio
3 of 10 |
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