In my experience, when a company has no answers for the "Why has your stock gone up so much?" question, the overinflated balloon is destined to pop. While Travelzoo
Travelzoo shares have risen more than 300% over the last six months, but no one seems to know why. So I guess the company and the investment community will be just as baffled to see the shares drop more than 5% on a day when the company reported earnings that were 33% better than analysts' expectations ($0.08 per share vs. $0.06). I'm starting to get that sinking feeling I got in my stomach when the Internet craze of the late 1990s turned into the Internet daze.
While I am impressed with Travelzoo's sleek operations, and the firm's $5.2 million in cash with no debt, I am generally indifferent about the service the company offers. I usually go to Orbitz
I suppose it was the luck of the draw when I was looking for a Northwest Airlines
Although Travelzoo grew revenues 68% in the latest quarter, the company is still relatively young and the comparisons are fairly easy right now. Sometimes you have to put financial results in the right context in order to achieve the proper perspective. I agree with Seth Jayson, who recently said that "what flies up can come down pretty quickly."
With the shares still trading at over 100 times the estimated earnings of $0.27 a share for 2004, I see some bears finally clawing their way into the Travelzoo. Competition is accelerating in the online travel industry, and with the company's growth rate slightly above 30%, there appears to be a lot of room for the shares to fall.
Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.