Travel site Travelzoo (TZOO) has garnered acclaim – recently recognized as the Best Travel Website for Travel Deals at the British Travel Awards for 13 consecutive years. That notoriety has helped drive business, with the company reporting an increase in net income and healthy EPS growth. As Travelzoo transitions to a membership model, its stock, up 123% over the past year, is expected to soar further in 2025, making it an appealing option for investors to consider.
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Strategically Shifting Membership Model
Serving around 30 million members worldwide, Travelzoo is a renowned platform that collaborates with more than 5,000 reputable travel suppliers to offer its members exclusive travel deals and experiences, entertainment, and lifestyle.
Travelzoo faces stiff competition in the market from significant players such as TripAdvisor (TRIP), Google (GOOG), Booking.com (BKNG), Expedia (EXPE), and Trivago (TRVG). However, its unique offerings have made it stand out, earning it the title of ‘Best Travel Website for Travel Deals’ at the British Travel Awards. It also received first rank for travel deals in Germany by the national newspaper Die Welt.
In 2025, Travelzoo plans to shift its strategy to convert non-paying members into paying ones. This strategy represents a significant pivot for the company, given that its primary source of revenue has been advertisements rather than membership fees. The company anticipates a rise in revenue from new membership fees.
Projecting Substantial Growth
In Q3, Travelzoo reported mixed results. Revenue of $20.1 million missed analysts’ expectations by $1.05 million while marking a 2% year-over-year decline. The main revenue categories consist of Advertising and Membership Fees, with advertising revenue equating to $18.7 million for Q3 2024. Revenue from membership fees was reported to be $1.4 million, though it is expected to drive significant revenue and profit growth in 2025 due to the introduction of a membership fee in 2024.
Travelzoo’s GAAP operating income remained high at 28%, while the GAAP operating margin was steady at 25% for North America and increased to 17% in Europe. Non-GAAP operating profit for Q3 2024 stood at $4.9 million, making up 25% of revenue compared to the $3.9 million in the prior year. GAAP EPS of $0.26, beat expectations by $0.06.
As of the quarter’s end, the company reported consolidated cash, cash equivalents, and restricted cash of $12.1 million, with an operating cash flow of $5.3 million, even after purchasing 552,679 shares of the company’s outstanding common stock during Q3. Looking forward, management projects substantial growth in revenue for 2025 from additional revenue from membership fees.
Stock Price Surging
The stock finished 2024 with a tremendous surge, up roughly 180% in the past six months. It trades near the top of its 52-week price range of $7.12 – $22.44 and shows ongoing positive price momentum as it trades above all major moving averages. The stock trades at a premium to industry peers, with a P/S ratio of 3.28x compared to the Communication Services sector average of 1.27x.
Analysts following the company have been bullish on TZOO stock. For example, Barrington’s Patrick Sholl recently raised the price target on the shares to $17 (from $15) and kept an Outperform rating, noting more substantial profits on cost control and confidence in the company’s ability to grow revenue and earnings in 2025.
Travelzoo is rated a Strong Buy overall, based on the recent recommendations of three analysts. Their average price target for TZOO stock is $21.67, which represents a potential upside of 2.46% from current levels.
Final Thoughts on TZOO
Having made a name as one of the best travel websites, Travelzoo is making bold financial moves to solidify its status. This company’s unique position, along with a strategic shift toward a new membership model in 2025, promises to deliver a significant boost in revenue. Despite fierce competition, Travelzoo has demonstrated resilience and has strong performance figures overall. Its stock is showing positive momentum, with expectations for substantial revenue growth next year likely to keep that trend going. It’s an opportunity savvy investors might find compelling.
