TZOO - Travelzoo (TZOO) - The Speedy Recovery Trips
Q3 disappoints. Total company revenues increased a solid 14% to $15.7 million, but it was well below our $20.7 million estimate and represented a sequential quarterly revenue decline from $19.1 million in Q2. Management believes that news about the Covid Delta variant, prospect of travel restrictions, kept travelers from booking, which adversely affected results. Despite revenue headwinds, Q4 is expected to be profitable. The company has significantly reduced fixed costs and has the capability to report profits despite a slower than expected revenue recovery. Revenue visibility remains low. As such, we are lowering our Q4 revenue estimate from $22.5 million to $17.7 million. Our adj. EBITDA estimate is lowered from $6.7 million to $2.5 million. Nonetheless, we anticipate that the company will be profitable, forecasting $0.04 in Earnings Per Share.Revising 2022 estimates downward. We believe that the moderating revenue trends exemplified in the latest quarter is transitory, largely reflective of the travel disruptions and media attention given to the Covid 19 Delta variant. Given the lack of revenue visibility, however, we are taking a more conservative posture towards the company's revenue recovery. Our full year 2022 revenue estimate is lowered from $92.5 to $81.0 million, which is roughly 73% of the company's pre-Covid revenues of $111.4 million. Due to lower revenues, we are lowering our full year 2022 adj. EBITDA estimate from $23.8 to $13.8 million. Lowering price target. Our price target was based on our 2023 cash flow estimate, which is unchanged at this time. Given the slower than expected revenue recovery, revenue and cash flow visibility appears low. As such, we are lowering our cash flow target multiple from 14 to 10 to reflect the uncertainty created by the recent disruption in the company's fast paced revenue recovery. Our price target is lowered from $25 to $18. Compelling stock valuation. Near current levels, the TZOO shares trade at 5.6 times Enterprise Value to our 2023 adj. EBITDA estimate, or below the company's historic 5 year and 20 year trading ranges of 6.3 times and 9.5 times, respectively. We believe that the shares reflect a favorable risk/reward relationship given the prospect for an acceleration in revenue when the travel industry's recovery gains traction. Read More >>