Travelzoo (TZOO) is scheduled to report Q208 results after the market closes on July 24. Based on our analysis, we at eChristianInvesting are expecting TZOO to report better than expected results that beat Wall Street’s consensus expectations.

We are forecasting revenues of $21.7M versus analyst consensus of $21.0M. This would represent an 8% increase in revenues from last year’s $20.1M in the same period.

We expect that the downturn in the U.S. economy was actually a positive for Travelzoo’s business. High gas prices led vacationers to look more diligently for vacation bargains. This appears to have resulted in increased traffic levels to the site and a jump in subscription levels for the popular Top 20 email newsletter. 

Share Performance

Travelzoo’s shares have dropped a whopping 40% this year. That compares poorly to the much more modest drop of only 13% for the NASDAQ. Unfortunately for Travelzoo, they were the victim of their own success as they traded at a very high valuation for most of last year. The drop in overall valuations as well as the markets realization that expansion into Europe and Asia-Pacific was going to have a serious effect on their short-term profitability has resulted in the big sell-off this year.

Valuation

Shares are now trading at 27x consensus 2009 EPS estimates. This represents a slight premium to their peer group. While we see upside potential in the company’s top line, the expense in expanding their business internationally is likely to hit the bottom line again this quarter. Therefore, we expect the shares to remain range-bound or possibly even trade lower following the earnings announcement.

Disclosure: At the time this article was published, the author did not have a financial position in any of the stocks mentioned in this article.

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