TZOO - Travelzoo: Business Model Transformation With Considerable Execution Risk

2024-04-02 05:07:04 ET

Summary

• Travelzoo’s revenue has persistently declined during the last decade (CAGR: -7%), owing to changing consumer behaviors and technological development reducing TZOO’s value proposition.
• TZOO has underinvested and inefficiently developed, contributing to a significant loss of ground. We believe it is unlikely the company will ever reach its historical level of importance to consumers.
• The company is transitioning to a premium-only subscription model which should allow for some improvement in revenue but it remains to be seen what its conversion rate will be.
• If it can maintain its current trajectory and margin levels, TZOO is considerably undervalued today. The issue is that there is almost no visibility as to its normalized performance level.
• Its current subscribers have received a 1 year (2024) free subscription, so this will only be a factor in 2025.

Introduction and thesis

Travelzoo ( TZOO ) is a global media commerce company that provides insider deals and experiences for members through its website, email newsletters, social media channels, and mobile apps. The company offers discounted deals on travel, entertainment, dining, and other lifestyle activities, partnering with thousands of travel and entertainment companies worldwide....

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