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Travelzoo Rises 39.7% Since Q3 Earnings: Time to Buy the Stock?
TZOOTravelzoo(TZOO) ZACKS·2024-11-27 17:11

Core Viewpoint - Travelzoo has experienced a significant stock price increase of 39.7% following its third-quarter 2024 results, indicating a strong investment case despite a slight revenue decline [1]. Financial Performance - The company's consolidated revenues for Q3 2024 decreased by 2% year-over-year to 20.1million,whileoperatingprofitincreasedby3020.1 million, while operating profit increased by 30% to 4 million, representing 20% of revenues, up from 3.1millionthepreviousyear[4].−Non−GAAPoperatingprofitreached3.1 million the previous year [4]. - Non-GAAP operating profit reached 4.9 million, constituting 25% of revenues, showing improvement from 3.9millionintheprioryear[4].GeographicPerformance−TheEuropeansegmentshowedstrongperformancewithoperatingmarginsrisingto173.9 million in the prior year [4]. Geographic Performance - The European segment showed strong performance with operating margins rising to 17% in Q3 2024, while North American revenues fell by 4% to 12.8 million but maintained a robust operating margin of 25% [5]. Strategic Initiatives - The introduction of a membership-fee model at the beginning of 2024 is expected to drive significant revenue and profit growth in 2025, with legacy members exempt from fees until January 2025 [6]. - The company's 60% ownership in Jack's Flight Club saw an 11% revenue increase year-over-year to 1.2millioninQ3,withpremiumsubscribersgrowingby141.2 million in Q3, with premium subscribers growing by 14% [7]. Financial Position - Travelzoo reported 12.1 million in cash and cash equivalents as of September 30, 2024, and generated an operating cash flow of 5.3millionduringthequarter,alongsidesignificantsharerepurchases[9].ValuationMetrics−Thestock′sforwardP/Eratiostandsat16.85,suggestingpotentialundervaluationcomparedtotheZacksInternet−Commerceindustry′saverageof25.25,indicatinganopportunityforvalue−orientedinvestors[10].InvestmentOutlook−Theanticipatedrevenuegrowthin2025,drivenbythemembershipfeeimplementation,positionsTravelzoofavorablyinthepremiumtravelmarketsegment,targetingaffluenttravelers[17].−TheZacksConsensusEstimateforTravelzoo′s2024revenuesis5.3 million during the quarter, alongside significant share repurchases [9]. Valuation Metrics - The stock's forward P/E ratio stands at 16.85, suggesting potential undervaluation compared to the Zacks Internet - Commerce industry's average of 25.25, indicating an opportunity for value-oriented investors [10]. Investment Outlook - The anticipated revenue growth in 2025, driven by the membership fee implementation, positions Travelzoo favorably in the premium travel market segment, targeting affluent travelers [17]. - The Zacks Consensus Estimate for Travelzoo's 2024 revenues is 85.57 million, reflecting a year-over-year growth of 1.3%, with earnings expected to grow by 36.25% to $1.09 per share [18]. Conclusion - Current investors are advised to hold onto Travelzoo shares due to strong fundamentals and growth catalysts, while potential investors may find an attractive entry point following the recent stock surge [20][21].