Travelzoo Shares Nosedive After Weak Q1

Apr.29.08 | About: Travelzoo Inc (TZOO)

Travelzoo (NASDAQ:TZOO) shares are under pressure today after the company reported worse-than-expected Q1 earnings yesterday (see transcript).

While revenues were in line at $21 million, the provider of newsletters on travel deals lost 7 cents a share; the Street had expected a profit of 8 cents. Travelzoo does not provide financial guidance, so there was no comment on the Q2 outlook.

In a research note, Wedbush Morgan’s Edward Woo notes that the company’s results are being hurt by its investments into international expansion; he says any return from its moves into Europe and Asia is unlikely before 2009. He also notes that consolidation and contraction in the airline industry reduces the company’s potential pool of advertisers. Woo maintains his Hold rating on the stock, but cut his price target to $11 from $12. He cut his EPS estimate for 2008 to 1 cent from 14 cents.