Analysts at Noble have awarded Travelzoo (NASDAQ:TZOO) an ‘Outperform’ rating after the media commerce company that publishes travel and entertainment offers reported “solid” second quarter earnings.
The company posted earnings per share of $0.17 on revenue of $21.1 million for 2Q, up from EPS of $0.08 and revenue of $17.7 million in the year-ago quarter.
Noble’s analysts highlighted that the company reported revenue above their estimate of $20.5 million, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $4.2 million was above their forecast of $3.4 million.
“Revenue growth accelerate to 19% in 2Q, compared with 17% growth in 1Q,” they wrote.
The analysts also pointed out Travelzoo (NASDAQ:TZOO)’s strong margins, with its EBITDA margins up to nearly 20% driven in large part by a 27% operating profit margin in the North America business segment.
“Operating profit in Europe, though, still negative, improved to nearly flat (negative 3%),” they wrote.
Following Travelzoo’s 2Q earnings, the analysts wrote that they were slightly lowering their 3Q revenue and adjusted EBITDA estimates and raising their 4Q forecast to reflect sharper seasonality.
“Notably, 4Q is an increasingly seasonal strong quarter, due to the prevalence of Black Friday type deals,” they wrote.
“Our full-year estimates of revenue and adjusted EBITDA are largely unchanged, at $84 million and $18.7 million, respectively.”
Along with their ‘Outperform’ rating, the analysts awarded the stock a $13 price target.
Travelzoo shares traded at US$7.25 on Friday morning.
“Near current levels, the TZOO shares trade at 5.2 times enterprise value to our 2024 adjusted EBITDA estimate,” they wrote.
Noble's $13 price target is based on a target enterprise value (EV)/2024 adjusted EBITDA multiple of 10 times. This multiple is on the lower end of the company's historical trading range. The analysts believe that a 10 times EV/2024 adjusted EBITDA multiple aligns better with the company's projected long-term cash flow growth, which is expected to be in double digits.
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