Travelzoo Shares Don't Like an Earnings Miss

Travelzoo (TZOO-NASDAQ) is seeing its own version of its Wednesday fare sale for its shares on Tuesday.  The street isn’t happy with its results not meeting expectations, and that is taking out more steam.  Shares closed up 2.1% ahead of numbers, but shares are down 10% at $30.07 in after-hours trading.

*Revenues of $17.7 million, up 27% year-over-year
*Net income of $4.3 million, up 159% year-over-year
*Cash flow from operations of $5.5 million, up 177% year-over-year
*$0.26 earnings per share, up from $0.10 in the prior year period
*effective income tax rate was 46.3%, down from 56.7% in the prior year period.

Estimates were roughly $0.28 on $18.16 million, so that is why the shares are down.  Here is what Ralph Bartel, chairman and chief executive officer said: “Q4 is typically a quarter where we see a smaller increase in revenue and higher marketing costs because of the holiday season. We are very excited about our plans for the launch of a new product in spring 2007 in North America and our growth prospects in Europe.”

The problem with TZOO as a stock is that it is historically volatile as it could be, although sicne summer it has traded in a narrow band.  The January short interest was listed as 2.455 million shares, which is 11.7 times the average daily volume.  Its market cap at the close was $510 million.

Jon C. Ogg
February 6, 2007

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