Stock Analysis

Earnings Update: Here's Why Analysts Just Lifted Their Travelzoo (NASDAQ:TZOO) Price Target To US$16.17

  •  Updated
NasdaqGS:TZOO
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It's been a good week for Travelzoo (NASDAQ:TZOO) shareholders, because the company has just released its latest yearly results, and the shares gained 7.3% to US$16.04. Revenues were 30% better than analyst models forecast, at US$73m. Perhaps unsurprisingly, statutory losses were also slightly larger than expected, at US$1.18 per share, reflecting the higher costs which were likely incurred in generating that revenue. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Travelzoo

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NasdaqGS:TZOO Earnings and Revenue Growth March 19th 2021

After the latest results, the three analysts covering Travelzoo are now predicting revenues of US$76.9m in 2021. If met, this would reflect a modest 5.5% improvement in sales compared to the last 12 months. Travelzoo is also expected to turn profitable, with statutory earnings of US$0.23 per share. In the lead-up to this report, the analysts had been modelling revenues of US$76.9m and earnings per share (EPS) of US$0.23 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 37% to US$16.17. It looks as though they previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Travelzoo at US$13.00 per share, while the most bearish prices it at US$11.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Travelzoo is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.5% annualised growth until the end of 2021. If achieved, this would be a much better result than the 6.5% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 16% per year. So although Travelzoo's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Travelzoo analysts - going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Travelzoo that you need to take into consideration.

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What are the risks and opportunities for Travelzoo?

Travelzoo, an Internet media company, provides travel, entertainment, and local deals from travel and entertainment companies, and local businesses in Europe and North America.

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Rewards

  • Earnings are forecast to grow 93.66% per year

Risks

  • Does not have a meaningful market cap ($85M)

  • Shareholders have been diluted in the past year

  • Profit margins (1.4%) are lower than last year (7.1%)

  • Large one-off items impacting financial results

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