Could Travelzoo’s Stock Rise By 50% Post COVID-19 Crisis?

by Trefis Team
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Comparing the trend in Travelzoo‘s (NASDAQ: TZOO) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 50% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of TZOO’s performance against the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did TZOO’s Stock Fare Compared With S&P 500?

Between February 19th and April 23rd, TZOO stock has lost 58% of its value (vs. about a 17% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Travelzoo’s Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

The company’s stock has suffered due to the spread of the coronavirus as states and countries are on lockdown due to the coronavirus crisis. The travel industry has been the worst hit during this pandemic, which includes hotels, airlines, and travel companies. Travelzoo makes most of its revenues out of advertising – primarily of listing fees paid by the mentioned travel businesses to advertise their offers on Travelzoo’s media properties.

We believe Travelzoo’s Q1 June results will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by its Q2 September earnings timeframe, it’s likely Travelzoo’s stock is going to see a continued drop when results confirm palpable reality.

Travelzoo’s Stock Witnessed Something Similar During The 2008 Downturn

Travelzoo’s stock declined from levels of around $23 in October 2007 (the pre-crisis peak) to roughly $6 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 76% of its value from its approximate pre-crisis peak. This marked a much higher drop than the broader S&P, which fell by about 51%.

However, TZOO stock recovered post the 2008 crisis, to levels of about $12 in early 2010, rising by 121% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will TZOO’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that TZOO stock has fallen by 58% this time around compared to the 76% decline during the 2008 recession, we believe it can potentially recover by 50% to levels of approaching $7 once economic conditions begin to show signs of improving. This marks a partial recovery back to the $11 level TZOO stock was before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture and complements our analyses of Coronavirus impact on a diverse set of TZOO’s peers – such as competitor Expedia. The complete set of coronavirus impact and timing analyses is available here.

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