I have not talked about this name on the website, but Travelzoo (TZOO) is an old momo stock which has come back to life; I have been watching the past four or five months in a bit of awe. This is another example of where valuation simply does not matter (until one day it does), and trying to figure out a top based on traditional metrics has created immense pain for the "smart money."
TZOO is one of the most heavily-shorted stocks in the market, and for obvious reasons: In mid-March it traded at 40x-ish forward estimates on 2011. That was when it was $45 ... after tripling from $15 at the time Bernanke promised us QE2 in late August. Over-extended after a 200% run? Not so fast.
[Click to enlarge]
With today's 24%+ gain, the stock has doubled yet again in just over a month, from $45 to $90. From the original $15, that's a 500% gain.
The catalyst today is an earnings report, in which the company posted a solid beat of 9 cents; 37 cents v 28 cents expectation. Even if we take the year-end analysts' estimate of $1.17 and say Travelzoo will make $1.40 (aggressive assumption) we are now talking a forward PE of 65. But I guess in a market where Chinese Internet stocks are trading at Price to Sales of 150, everything else is a bargain. It's the relative valuation game, 1999 style.
To reiterate: No one is saying these companies are not growing ... we have simply returned to an era where no valuation is too high for a select group of about 50 companies.
Full report here.
- For the quarter, the company posted revenue of $37 million and non-GAAP profits of 37 cents a share, well ahead of the Street consensus at $33.4 million and 28 cents. Revenue was up 30% from a year ago.
- The company said North American revenue was up 23%; European revenue was up 53%.
- Travelzoo said it had 19.9 million unduplicated subscribers to its e-mail newsletters, up 6% sequentially and 12% from a year ago.
- In North America, total unduplicated number of subscribers was 14.8 million as of March 31, 2011, up 7% from March 31, 2010 and up 4% from December 31, 2010. In Europe, total unduplicated number of subscribers was 5.1 million as of March 31, 2011, up 29% from March 31, 2010 and up 11% from December 31, 2010.
- “We kicked off 2011 with record revenues and record adjusted operating income. Subscribers grew by over 1 million, the second best performance in our company’s history,” said Chris Loughlin, CEO of Travelzoo. “We doubled adjusted operating income year-over-year as we continued to ramp up Local Deals, which are now live in 48 markets in six countries. North America revenues grew at the fastest pace in over 4 years. Europe saw the highest quarterly subscriber growth ever and returned its first significant quarterly profit."
