Travelzoo (NASDAQ:TZOO) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 23% to US$15.36 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
After this upgrade, Travelzoo's three analysts are now forecasting revenues of US$76m in 2021. This would be a sizeable 28% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 1,787% to US$0.68. Previously, the analysts had been modelling revenues of US$68m and earnings per share (EPS) of US$0.23 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$19.67, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Travelzoo, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$13.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. For example, we noticed that Travelzoo's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 63% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 13% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 16% annually. So it looks like Travelzoo is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Travelzoo could be a good candidate for more research.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Travelzoo going out to 2023, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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What are the risks and opportunities for Travelzoo?
Earnings are forecast to grow 93.66% per year
Does not have a meaningful market cap ($84M)
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
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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