On Wednesday, Litchfield Hills Research initiated coverage on shares of Travelzoo (NASDAQ:TZOO) with a Buy rating and set a price target of $35.00. The firm highlighted the stock's attractive valuation, noting that it is trading at a discount when assessed through a discounted earnings model and in comparison to its industry peers.
According to Litchfield Hills Research, their discounted earnings model indicates a fair value of $35 per share for Travelzoo. Furthermore, the firm compared Travelzoo's valuation to that of its peers, observing that the average Market Cap/Sales multiple for the year 2025 is approximately two times. They suggested that if Travelzoo's shares were to reach this average sales multiple, the price could be around $16.
Looking ahead to 2026, Litchfield Hills Research applied the same sales multiple based on their most conservative estimates. They projected that Travelzoo's market capitalization could reach $320 million, which would translate to around $26 per share. This analysis supports the firm's position that Travelzoo's stock is currently undervalued.
The firm's assessment relies on the potential for Travelzoo's shares to align with the broader market's valuation metrics over the next few years. Their price target of $35.00 represents a significant potential upside from the current trading levels of Travelzoo's stock.
Investors may take note of this new coverage as they consider the future prospects of Travelzoo in the context of the online travel deals market. The Buy rating from Litchfield Hills Research reflects an optimistic outlook on the company's ability to grow its market capitalization and align with industry valuation standards.
In other recent news, Travelzoo, an internet media company, is attracting attention with its steady Q2 revenue of $21.1 million, marking a consistent year-over-year performance. The company also reported a 23% increase in operating profit, reaching $4.0 million, representing 19% of revenue. This financial performance has led Noble Capital to revise its EBITDA estimates for the year 2025, raising its price target on the company's shares to $18.00.
Travelzoo's shares are currently trading at an appealing 4.3 times enterprise value to the projected 2025 adjusted EBITDA, which is below the company's historical trading ranges. The company is also expecting significant growth in revenue from membership fees in 2025 due to the introduction of a membership fee for legacy members, who currently constitute over 95% of the total membership base.
Looking ahead, Travelzoo anticipates year-over-year growth in revenue for Q3 2024, albeit at a slower pace than in 2023, and higher profitability compared to the previous year. These recent developments suggest that Travelzoo is on a steady path for growth, backed by the positive outlook from analysts at Noble Capital.
InvestingPro Insights
The recent coverage by Litchfield Hills Research on Travelzoo (NASDAQ:TZOO) presents a positive outlook for the company's valuation. Complementing this perspective, InvestingPro Tips reveal that management's aggressive share buybacks and Travelzoo's strong cash position relative to its debt could further signal confidence in the company's financial health. Moreover, Travelzoo's impressive gross profit margins, which stand at 87.6% over the last twelve months as of Q2 2023, align with the firm's optimistic assessment.
InvestingPro Data supports the notion of under-valuation highlighted by Litchfield Hills Research, with Travelzoo's P/E Ratio at 11.57 and an even more attractive adjusted P/E Ratio of 10.46 for the same period. Moreover, the company has shown robust revenue growth of 9.96% over the last twelve months as of Q2 2023. It is also worth noting that Travelzoo's stock has experienced considerable price volatility, with a 51.38% return over the last year, which may appeal to certain investors seeking growth opportunities.
For those looking for deeper insights, InvestingPro lists several additional tips, including the company's low P/E ratio relative to near-term earnings growth and a strong return over the last three months, which could be of interest when evaluating Travelzoo's investment potential.
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