Want to fill your email box with flames? Write about Travelzoo's
Well, my email box is asbestos-lined and ready for the next onslaught -- but let me put this good news right up front. If you loved the stock at the day's high of $89.80 when I wrote about it in November, or the $66.04 high it reached when I revisited it in January, you should love it now. It's currently at $37.52, down almost 19% today.
On the surface, today's first-quarter financial news is upbeat. Revenue increased 74%, and net income soared 82%. You are not going to see those kinds of numbers from heavyweights like Microsoft and Intel.
You do not need rose-colored glasses to see strong improvements, either. For example, operating margins increased from 26.5% in last year's comparable quarter to 30.4% this year. Profit margins are great, too, having increased from 15.6% to 16.3%. Heck, even Wall Street darling Google
Travelzoo's latest annual report shows another significant improvement, too. The company's largest customer accounted for 12% of revenue, and no other customers reached 10% or more. That's a big improvement from 2002, when the two largest clients accounted for 29% of total sales. That mutes the old concern that the company could have a significant sales hit if a key vendor departed.
Two concerns that do remain are Yahoo!
Before today's earnings announcement, analysts were expecting the company to earn $0.63 a share -- almost double 2004's earnings. Even after today's huge percentage loss, the stock is still trading at roughly 60 times forward earnings. That's rich in virtually any market.
I have said it before, and I will say it again: Where is the competitive advantage that enables long-term business viability? Today's success is great -- but it isn't worth 60 times earnings. The best advice continues to be to watch out.