Travelzoo Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online travel deal specialist Travelzoo (Nasdaq: TZOO  ) plummeted 30% Thursday after its quarterly results easily missed Wall Street expectations.  

So what: Hurt by a spike in costs and weaker-than-expected growth at its European newsletter business, Travelzoo posted a second-quarter profit of $0.30 per share, versus the average analyst estimate of $0.38 per share. The shares had been on fire over the past month, trading at a lofty forward P/E of 36 as of yesterday's close, so today's big plunge comes as no surprise, as investors look to significantly readjust their growth expectations.

Now what: I wouldn't be so quick to pounce on today's pullback. Even with the drop, Travelzoo is up a whopping 275% over the past year and still trades at a forward P/E premium to main rivals Expedia (Nasdaq: EXPE  ) and priceline.com (Nasdaq: PCLN  ) . In other words, if rising costs and slowing European growth continue to be a problem, Travelzoo has plenty of more room to fall.

Interested in more info on Travelzoo? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of priceline.com. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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  • Report this Comment On July 21, 2011, at 3:31 PM, hameshatumkochah wrote:

    Hello,

    Please update the disclosure: TZOO is also recommended by Fool.com's service. Earlier, you used to write which service had recommended; that was a fairer disclosure policy and more honest, something more in line with Fool.com's performance over the years.

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