Travelzoo (TZOO): Time for a Reality Check

First Albany downgraded shares of Travelzoo (NASDAQ: TZOO) to 'Neutral' from 'Buy' today and their shares are down 7% and dropping. With shares trading just under $25, this stock is starting to look more appealing.

The Masters think TZOO shares could go even lower now that it expects its earnings in 2007 and 2008 to be hurt by new business initiatives in France, Hong Kong and Japan.

Say what you will about this web 2.0 company but Travelzoo has only 80 or so employees and revenue has grown an average rate of 57% for the past three years. Let Wall Street continue to hate the stock, we'll stand on the sidelines and once it goes down for the count, it will be time to buy. These guys still managed to pull in $50.7 million in 2005 and $69.5 million in 2006. If the stock gets even lower, maybe Barry Diller will take it out or some other big money guy like Carl Icahn. This is Wall Street my fellow Masters, never say never.

I would love to see Expedia (EXPE) come in and buy up TZOO, it would be a great match with Hotwire.com and Hotels.com already under their belt. Let's see some consolidation in the online-bargain-travel sector because new travel sites that can save you money seem to pop up every two weeks - like Yapta.com (what do these guys do again that is so different?)

Look online travel companies, there are only so many websites the American consumer can remember, if you keep cranking out new sites, how in the hell do you expect us to remember them? Most of us know the one's that are most advertised.

• Expedia.com (EXPE)
• Priceline.com (PCLN)
• Orbitz.com
  
  blah, blah, blah...

Travelzoo, do yourself a favor, put your company up for sale, and cash out -- big time. Make your 80 employees super rich and never work again, then let everyone fight to buy your company. It's the American dream, work hard, find a niche, then sell it to the highest bidder. After it's done, you sit back and sip Mojitos poolside for the rest of your life. Or you could struggle to gain market share and grow your company in a cut throat business that will end up consolidating into a few major players in the next 5 years. Watch your revenue decline year over year, and those shares that were once worth $25 become worth $5, then $2, then OTC BB death.

Article written by: Frank Lara Jr.
Article posted on: July 16th, 2007

Do you hate us more than Jeff Mackey ? Voice your thoughts at Our Forum.

Disclaimer: The Author does not hold any position in TZOO, EXPE, or PCLN. But he's thinking about it.