Travelzoo (NASDAQ:TZOO) stock held onto Wednesday’s gains after the company reported strong fourth quarter operating results supported by its North America segment, warranting its ‘Outperform’ rating and a higher price target from analysts at Noble Capital.
Shares of the global internet media company that provides exclusive offers and experiences for members traded at $5.28 in early Thursday afternoon trade in New York following Wednesday’s 13% jump.
Revenue for the three months to December 31, 2022, rose 36% year-over-year to $18.6 million. In constant currencies, it reached $19.4 million.
“Notably, the company's North America segment grew revenue by 53% and reported margins of 29%,” analysts at Noble said in a client note as they raised their price target for the stock to $10 from $9 while maintaining their ‘Outperform’ rating.
“The company benefited from favorable travel trends and lower operating expenses, particularly marketing expenses.”
The Noble analysts noted that Travelzoo has positive revenue and margin momentum moving into 2023, with management highlighting the opportunity for further margin growth given potential advertising price increases in 2Q.
“The company appears to be benefiting from pent-up travel demand from its travel enthusiast base,” the analysts wrote. “We are revising upward our fiscal 2Q and full-year 2023 revenue and adj. EBITDA estimates, while largely maintaining our 1Q estimates.”
Near current levels, the analysts said Travelzoo’s shares trade at a compelling 4.3 times enterprise value (EV) to their 2024 adjusted underlying earnings (EBITDA) estimate, well below its historical trading range.
The increased price target reflects a target EV/adjusted EBITDA multiple of 8.4 times.
“In our view, the TZOO shares offer a compelling risk/reward relationship,” the analysts concluded.
Contact the author at stephen.gunnion@proactiveinvestors.com