Travelzoo (NASDAQ: TZOO), a global publisher of exclusive offers and experiences for members, has shown a strong performance over the last few quarters. The stock has gained over 75% since the beginning of the year, backed by the solid growth in its North American and European markets. While its operations in the Asia Pacific region have been a drag on its bottom-line, the company plans to invest in these markets and improve its performance in the coming quarters.
We currently have a price estimate of $15 per share for the company, which is higher than its market price. View our interactive dashboard – Travelzoo’s Price Estimate – and modify the key drivers to visualize the impact on the company’s valuation.
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Investment In Asia Pacific Region Will Drive Top-Line Growth
Travelzoo’s social media followers and mobile app downloads have continued to grow steadily over the last few quarters. At the end of 2Q’18, the company’s global members had increased to 29.8 million, up from 29.5 in 2Q’17, driven by the increased activity levels of the members, advertisers, and partners in the North American and European markets.
However, this growth has been dampened by the weak growth in the Asia Pacific markets. Since the losses in the Asia Pacific businesses are not deductible for tax purposes, the company has experienced a high effective tax rate of close to 60% lately, which has weighed on its bottom-line. In addition, the company has experienced a sharp rise in its operating expenses due to the high marketing spend in North America and Asia Pacific markets. Yet, Travelzoo plans to expand its presence in the Asia Pacific market by investing heavily in these markets. The company will continue to expand its travel product offerings in these markets, which is expected to drive its revenue growth in this region.
New Initiatives Will Boost Sales
Travelzoo is actively working on a number of initiatives that are likely to boost purchases and bookings by its members in the second half of 2018 and beyond, driving its long-term value. Firstly, the company plans to launch a global technology that will allow its members across the globe to book hundreds of exclusive hotels as part of a complete trip or package. The company aims to negotiate competitive rates with its established and experienced partners in the hotel and airline industry and bundle them together in a package offering. Travelzoo plans to launch this technology in select markets in Europe, starting with Germany in the third quarter. This will allow the company to leverage its partnerships to create an enhanced product offering for its members.
Secondly, Travelzoo plans to ramp up its marketing spend across various markets. The company believes that there is a huge potential to grow its current member base, which it plans to achieve by investment in marketing and strategic partnerships. This investment will be used to strengthen the company’s brand and increase its visibility and reach. Further, the company will also increase the number of exclusive offers to its members that are available on demand. These investments are aimed at accelerating the company’s top-line growth and double its size over the next few years.
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