Shares of the travel deals publisher opened 7% higher yesterday -- but closed lower -- after posting blowout bottom-line results.
The company behind the popular Travelzoo Top 20 weekly list of sponsored getaway bargains put out a mixed second-quarter report. Revenue climbed a mere 5% to $39.4 million during the past three months, short of the 7% spurt that analysts were targeting.
However, operating margins of 26% -- Travelzoo's healthiest showing there in five years -- resulted in profitability surging 48% to $0.45 a share. Wall Street figured that Travelzoo's net income would clock in at only $0.41 a share.
A miss on the top and a beat on the bottom can sometimes send a stock lower, but Travelzoo has been beaten down so badly over the past year that a mere exhale is enough to initially push the stock higher. Gravity kicked in later in the day.
There are now 22.1 million opt-in subscribers for Travelzoo's digital missives through North America and Europe. Growth is slowing, particularly closer to home where North American revenue has posted back-to-back quarters of 4% revenue growth. However, the company's international business has been profitable over the past year, and margins are improving both here and abroad.
A couple of years ago, Travelzoo was one of the faster-growing players in online travel. These days only Orbitz Worldwide
Then again, if we approach Travelzoo as a provider of online deals, it's been profitable for far longer than niche leader Groupon
Travelzoo shares spiked earlier this year on reports that it was seeking to be acquired. Nothing materialized on that front, but at least the company's healthy operational improvement will give it the flexibility to be pickier if potential buyers do come around. The dot-com pioneer continues to be the surprising leader of its niche. It would just be more comforting for investors to see that niche actually growing at a headier clip for Travelzoo.
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