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Travelzoo's management indicates that fourth-quarter 2024 revenue growth is likely to be at a slower pace compared to 2023, with the potential for unexpected fluctuations. While the company anticipated higher profitability both year over year and quarter over quarter, the moderated growth outlook warrants caution.
The Zacks Consensus Estimate for revenues is pegged at $22.06 million, indicating 4.3% growth year over year.
The Zacks Consensus Estimate for earnings is pegged at 31 cents per share, indicating 29.17% growth year over year. The estimate has been unchanged over the past 30 days.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
TZOO Estimate Movement
Image Source: Zacks Investment Research
In the last reported quarter, the company delivered an earnings surprise of 30%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average positive surprise being 11.71%.
Our proven model does not conclusively predict an earnings beat for Travelzoo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Investors should consider holding Travelzoo shares or waiting for a better entry point ahead of its fourth-quarter 2024 earnings, as several factors could impact the company's near-term performance. The company faced headwinds in North America during third-quarter 2024, with revenues declining 4% year over year to $12.8 million. Some advertisers postponed their spending, and website launch delays from certain clients impacted performance. Although management expected these issues to normalize in the fourth quarter, the recovery trajectory remains uncertain.
Competition from industry giants like Expedia (EXPE - Free Report) and Booking.com, part of Booking Holdings (BKNG - Free Report) , along with specialized platforms like Kayak and Skyscanner, poses significant challenges. Groupon's (GRPN - Free Report) stronghold in local deals and the rise of AI-driven personalized travel platforms further squeeze Travelzoo's niche. While innovative ventures like Travelzoo META show promise, they are expected to have contributed minimally to revenues in the quarter under review.
On a positive note, Travelzoo's European operations showed resilience with a 1% revenue increase and significant margin improvement to 17% in the third quarter. This momentum could carry into the fourth quarter, supporting overall results. Additionally, Jack's Flight Club demonstrated solid growth with an 11% revenue increase and 14% growth in premium subscribers.
The company's transition to a membership fee model presents both opportunities and risks. While legacy members remained exempt from fees through 2024, the conversion of these members to paying customers in 2025 will be crucial for future growth. Management expects substantial revenue growth in 2025 from membership fees, but investor focus will likely remain on early conversion indicators in the fourth quarter.
Travelzoo maintained strong profitability with a third-quarter operating margin of 20% and generated a healthy operating cash flow of $5.3 million. The company's continued share repurchases, with 552,679 shares bought back in the third quarter, demonstrated confidence in its business model. Given the mixed signals heading into the fourth quarter, including slower expected growth, North American challenges, and the pending membership model transition, investors might benefit from maintaining current positions or awaiting clearer execution proof points before adding exposure.
TZOO Price Performance & Stock Valuation
In a striking display of market resilience, Travelzoo has seen its stock surge 122.2% in the past year, outperforming the broader Zacks Retail-Wholesale sector, which returned 23.9%, catching the eye of investors.
TZOO Outperforms Sector
Image Source: Zacks Investment Research
The stock's valuation metrics, including a forward P/E ratio of 12.5, suggest that the market may still be undervaluing the company's growth potential compared with the Zacks Internet - Commerce industry’s 23.98. This relatively low price-to-earnings multiple, coupled with the anticipated earnings growth from the membership fee implementation, presents an intriguing opportunity for value-oriented investors.
TZOO’s P/E F12M Ratio Depicts Discounted Valuation
Image Source: Zacks Investment Research
Investment Considerations: Balancing Risk and Reward
Investors should consider maintaining a Hold position on Travelzoo or wait for a better entry point despite its discounted valuation, given the mixed near-term outlook. While the company's European operations showed strength and Jack's Flight Club demonstrated solid growth, challenges in North America and anticipated slower fourth-quarter 2024 growth warrant caution. The transition to a membership fee model in 2025 presents significant growth potential but execution risks remain. Additionally, competitive pressures in the online travel space could impact market share gains. Though Travelzoo maintains healthy profitability and cash flows, clearer catalysts may be needed to justify additional exposure.
Final Thoughts
For investors considering TZOO stock ahead of its fourth-quarter earnings report, the company's track record of operational efficiency, coupled with its innovative approaches to monetization and low valuation multiples, might present an attractive entry point, but the risks associated with the execution of the membership fee strategy and intense industry competition warrant careful consideration before making an investment decision. New investors should wait for a better entry point.
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Travelzoo Set to Report Q4 Earnings: Buy, Sell or Hold the Stock?
Travelzoo (TZOO - Free Report) is set to report fourth-quarter 2024 results on Feb. 25.
Travelzoo's management indicates that fourth-quarter 2024 revenue growth is likely to be at a slower pace compared to 2023, with the potential for unexpected fluctuations. While the company anticipated higher profitability both year over year and quarter over quarter, the moderated growth outlook warrants caution.
The Zacks Consensus Estimate for revenues is pegged at $22.06 million, indicating 4.3% growth year over year.
The Zacks Consensus Estimate for earnings is pegged at 31 cents per share, indicating 29.17% growth year over year. The estimate has been unchanged over the past 30 days.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
TZOO Estimate Movement
Image Source: Zacks Investment Research
In the last reported quarter, the company delivered an earnings surprise of 30%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average positive surprise being 11.71%.
Travelzoo Price and EPS Surprise
Travelzoo price-eps-surprise | Travelzoo Quote
Earnings Whispers for TZOO
Our proven model does not conclusively predict an earnings beat for Travelzoo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
TZOO has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Shape TZOO for Upcoming Results
Investors should consider holding Travelzoo shares or waiting for a better entry point ahead of its fourth-quarter 2024 earnings, as several factors could impact the company's near-term performance. The company faced headwinds in North America during third-quarter 2024, with revenues declining 4% year over year to $12.8 million. Some advertisers postponed their spending, and website launch delays from certain clients impacted performance. Although management expected these issues to normalize in the fourth quarter, the recovery trajectory remains uncertain.
Competition from industry giants like Expedia (EXPE - Free Report) and Booking.com, part of Booking Holdings (BKNG - Free Report) , along with specialized platforms like Kayak and Skyscanner, poses significant challenges. Groupon's (GRPN - Free Report) stronghold in local deals and the rise of AI-driven personalized travel platforms further squeeze Travelzoo's niche. While innovative ventures like Travelzoo META show promise, they are expected to have contributed minimally to revenues in the quarter under review.
On a positive note, Travelzoo's European operations showed resilience with a 1% revenue increase and significant margin improvement to 17% in the third quarter. This momentum could carry into the fourth quarter, supporting overall results. Additionally, Jack's Flight Club demonstrated solid growth with an 11% revenue increase and 14% growth in premium subscribers.
The company's transition to a membership fee model presents both opportunities and risks. While legacy members remained exempt from fees through 2024, the conversion of these members to paying customers in 2025 will be crucial for future growth. Management expects substantial revenue growth in 2025 from membership fees, but investor focus will likely remain on early conversion indicators in the fourth quarter.
Travelzoo maintained strong profitability with a third-quarter operating margin of 20% and generated a healthy operating cash flow of $5.3 million. The company's continued share repurchases, with 552,679 shares bought back in the third quarter, demonstrated confidence in its business model. Given the mixed signals heading into the fourth quarter, including slower expected growth, North American challenges, and the pending membership model transition, investors might benefit from maintaining current positions or awaiting clearer execution proof points before adding exposure.
TZOO Price Performance & Stock Valuation
In a striking display of market resilience, Travelzoo has seen its stock surge 122.2% in the past year, outperforming the broader Zacks Retail-Wholesale sector, which returned 23.9%, catching the eye of investors.
TZOO Outperforms Sector
Image Source: Zacks Investment Research
The stock's valuation metrics, including a forward P/E ratio of 12.5, suggest that the market may still be undervaluing the company's growth potential compared with the Zacks Internet - Commerce industry’s 23.98. This relatively low price-to-earnings multiple, coupled with the anticipated earnings growth from the membership fee implementation, presents an intriguing opportunity for value-oriented investors.
TZOO’s P/E F12M Ratio Depicts Discounted Valuation
Image Source: Zacks Investment Research
Investment Considerations: Balancing Risk and Reward
Investors should consider maintaining a Hold position on Travelzoo or wait for a better entry point despite its discounted valuation, given the mixed near-term outlook. While the company's European operations showed strength and Jack's Flight Club demonstrated solid growth, challenges in North America and anticipated slower fourth-quarter 2024 growth warrant caution. The transition to a membership fee model in 2025 presents significant growth potential but execution risks remain. Additionally, competitive pressures in the online travel space could impact market share gains. Though Travelzoo maintains healthy profitability and cash flows, clearer catalysts may be needed to justify additional exposure.
Final Thoughts
For investors considering TZOO stock ahead of its fourth-quarter earnings report, the company's track record of operational efficiency, coupled with its innovative approaches to monetization and low valuation multiples, might present an attractive entry point, but the risks associated with the execution of the membership fee strategy and intense industry competition warrant careful consideration before making an investment decision. New investors should wait for a better entry point.