Travelzoo TZOO is set to report third-quarter 2024 results on Oct. 23.
Travelzoo provided a cautiously optimistic outlook. For the third quarter of 2024, the company expects year-over-year revenue growth, although at a slower pace than in 2023, along with higher profitability.
The Zacks Consensus Estimate for revenues is pegged at $21.15 million, indicating 2.7% growth year over year.
The Zacks Consensus Estimate for earnings is pegged at 20 cents per share, indicating 25% 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
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Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 21.05%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 23.66%.
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Earnings Whispers
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 Upcoming Results
As Travelzoo approaches its third-quarter earnings release, investors face a critical decision amid the company's ambitious transformation plans. The travel deals curator, serving 30.8 million global members as of June 30, 2024, stands at a pivotal moment with its bold strategy to convert 95% of its 29 million legacy members into paying subscribers by January 2025.
The company's second-quarter performance showed resilience, with revenues holding steady at $21.1 million and an impressive 23% surge in operating profit to $4.0 million. With a robust gross profit margin of 87.6% over the past year, Travelzoo's operational efficiency remains strong. This is expected to be reflected in the company’s upcoming earnings release.
The company's subsidiary, Jack's Flight Club, demonstrated promising growth in the third quarter, with a 9% year-over-year revenue increase and a 19% jump in premium subscribers in the previous quarter.
However, investors should weigh several risks. The company's ambitious paid membership transition could face resistance, potentially leading to member attrition in the quarter under review. Competition from industry giants like Expedia EXPE and Booking.com, part of Booking Holdings BKNG, along with specialized platforms like Kayak and Skyscanner, poses significant challenges. Groupon's GRPN 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.
Price Performance & Valuation
In a striking display of market resilience, Travelzoo has seen its stock surge 33.3% year to date, outpacing the broader Zacks Retail-Wholesale sector, which returned 20.2%, catching the eye of investors.
TZOO Outperforms Sector, Peers
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The stock's valuation metrics, including a forward P/E ratio of 11.32, suggest that the market may still be undervaluing the company's growth potential compared with the Zacks Internet - Commerce industry’s 25.21. 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
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Investment Considerations: Balancing Risk and Reward
TZOO presents a mixed investment opportunity with compelling valuation metrics and significant execution risks. The company's forward P/E ratio of 10.62, well below the industry average of 25.36, suggests potential undervaluation. Strong operational performance, evidenced by an 87.6% gross profit margin and 23% growth in operating profit in the second quarter, demonstrates efficient management. However, the ambitious plan to convert 95% of legacy members to paid subscriptions by 2025 portrays uncertainty. While Jack's Flight Club's growth and healthy cash position of $13.2 million provide some stability, intense competition from established players and the unproven success of new initiatives warrant investor caution ahead of the third-quarter earnings release.
Final Thoughts
For investors considering TZOO stock ahead of its third-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. Travelzoo currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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