Media commerce company Travelzoo’s (TZOO) publications and products include its Travelzoo Website; Travelzoo iPhone and Android apps; Travelzoo Top 20 email newsletter; and Newsflash email alert service. In addition, it has partnerships with more than 5,000 top travel suppliers and provides attractive deals to more than 30 million members. The stock has lost 20.1% in price over the past three months due primarily to investors’ fears about the spread of the COVID-19 Delta variant. TZOO is based in New York City.
The stock has gained 6.4% over the past month and 50.2% year-to-date to close yesterday’s trading session at $14.18.The increase in vaccination rate and pent-up demand for leisure travel in some parts of the world, including North America, primarily, drove the stock higher.
TZOO received the highest rating from consumers last month in the category of online travel deals in a national survey in Germany. In addition, the company continues to attract smart money attention. So, TZOO’s near-term prospects look promising.
Here are the factors that we think could shape TZOO’s performance in the coming months:
For the second quarter, ended June 30, 2021, TZOO’s total revenues increased 172.4% year-over-year to $19.08 million. The company’s North America business segment revenue increased 233% year-over-year to $14 million, while its Europe business segment revenue came in at $4.20 million, up 128% year-over-year. Its net income for the quarter was $3.05 million compared to a $6.30 million loss in the year-ago period. Its EPS was $0.22 compared to a $0.55 loss in the prior year period.
Even though the rapid spread of the Delta variant continues to worry investors, several travel-related companies have benefited from ‘revenge travelers.’ According to a study conducted by Simon-Kusher & Partners, 39% of leisure travelers still plan to book a vacation, while 30% have already booked their getaway. In addition, 71.2% of U.S. adults have received at least one dose of the COVID-19 vaccine. Also, the European Union does not restrict U.S. travelers despite the surge in COVID-19 cases. So, TZOO’s North America and Europe business segments could continue to gain.
Favorable Growth Estimates
Analysts expect TZOO’s revenue to increase 26.4% in the current year and 24% next year. The company’s EPS is expected to increase 200% in its fiscal year 2021 and 313.3% in fiscal 2022. Furthermore , its EPS is expected to grow at a 19.8% rate per annum over the next five years.
Consensus Rating and Price Target Indicate Solid Upside
TZOO has an average broker rating of 1.33. All three analysts that have rated the stock rated it Strong Buy or Buy. Also, Wall Street analysts expect the stock to hit $23.33 in the near term, which indicates a potential 64.5% upside.
POWR Ratings Reflect Rosy Prospects
TZOO has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TZOO has a B grade for Value, which is in sync with its 1.45x and 11.27x respective forward EV/S and EV/EBIT. Which are lower than the 2.60x and 17.62x industry averages.
The stock has an A grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase exponentially in the coming quarters. TZOO has an A grade for Sentiment also, in sync with favorable analyst sentiment.
TZOO has an A grade for Quality. This is justified given its trailing-12-month gross profit margin and ROCE of 81.12% and 116.98%, respectively, which are significantly higher than the 50.48% and 8.25% industry averages.
Of 73 stocks in the Internet industry, TZOO is ranked #1. Click here to see the additional POWR Ratings for TZOO (Momentum and Stability). Also, click here to access eight other top-rated stocks in the same industry.
TZOO carved out a market niche for itself in the travel space, providing exclusive deals, rather than direct reservations, like many other travel sites. Its stock has rallied over the past month on the back of impressive second-quarter earnings results, and still has plenty of upside to deliver. So, we think it’s wise to scoop up its shares now.
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TZOO shares were trading at $14.07 per share on Wednesday morning, down $0.11 (-0.78%). Year-to-date, TZOO has gained 49.05%, versus a 19.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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