- Barrington Research analyst James C. Goss reiterated an Outperform rating on the shares of Travelzoo TZOO with a price target of $10.
- The company reported Q3 earnings below Street estimates.
- The analyst said Travelzoo expects Q4 revenue to grow versus a year ago, though there is meaningful uncertainty in the economic and advertising environment.
- Goss' current estimates call for acceleration of revenue growth versus the Q3 trend.
- Europe revenues were soft in the quarter. While management had previously noted limited Eastern Europe exposure, the geopolitical situation does create additional uncertainty for operations in that area, added the analyst.
- While demand for travel is important, a particularly strong demand environment can make it more challenging to secure attractive travel deals with suppliers and travel operators less inclined to offer attractive deals, said Goss.
- Pent up demand in the midst of the pandemic created a situation in which many travelers were willing to pay inflated prices for travel as the world began to return to some sense of normalcy.
- He noted that the resulting favorable situation for lodging and airline operators reduced the need for developing promotional packages of the type advertised by Travelzoo to its client base.
- Travelzoo's clientele tends to be affluent, travel-focused and receptive to offers of high-end trips at pricing that provides good value.
- Goss said inflationary pressure would be expected to crimp ongoing consumer demand for leisure travel, which may be a more supportive environment to offer deals for travel, though, it is far from certain how much of this activity would flow to Travelzoo.
- The recovery in advertising, to mitigate the working capital pressure from the voucher liabilities, is taking longer and is choppier than what the analyst had initially expected.
- The analyst expects the company to reinvigorate its business model and benefit from new initiatives. The analyst's view presumed a recovery in leisure travel from the exceptionally depressed levels beginning with local markets and ultimately extending to international travel.
- Price Action: TZOO shares are trading higher by 4.69% at $5.03 on the last check Thursday.
- Photo Via Company
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