3SOF

Quote from: berloga on July 18, 2007, 09:32:46 AM
David, the problem I see with TZOO is that you look 3 years ahead as there is little hope for the near future in this stock. Whereas the stellar performers of the portfolio deliver already today and have bright plans for the future. I agree, international expansion may bring fruits to
the table, but when it happens nobody knows. TZOO does not look attractive to investors, I guess, so many bail out. At the same time, you got 13 other stocks to worry about, so perhaps we can keep this for "3 years" or until it begins generating profits from its new operations.

I understand what you're saying berloga. But nothing is standing in the way of TZOO's US operations growing more than expected and that way EPS would still rise, even with the company losing money in other parts of the world.

I think initiatives like the company showed the other day, with those interactive TV ads on airports, will probably add more demand to the company's advertising services.

It reminded me the business of a $2 B plus Chinese company, what was its name ... ah, Focus Media (FMCN).

We'll keep talking. I'll keep holding TZOO, despite the short term technical weakness.

Hello

This is going to be one of the toughest decisions in my investment career, but I'm going to take another loss on TZOO.

I know the timing is awful, that just a few days ago the Main was winning 10% on TZOO and now it is losing 10%. So you know how hard it is to take the loss now, but of course, you also know that often the hardest thing to do is also the right thing in the stock market. 

There are three main reasons for my attitude:

1) Core business is retrenching

It took some investigation to see this, but I found the following in the company's 10-Q:



As you can see, in North America, the number of "subscribers" rose 8%, yet, page views fell 12%. I have an explanation for this, also from my experience managing the www.3stocksonfire.org small business: the e-mail doesn't work anymore as a marketing tool, at least, not the way it used to be.

Now, when one sends a bulk e-mail like TZOO does, more than half is blocked by anti-spam software (even when it's not spam) and of the ones that get to the inbox, not many people open them. Reason? Most people gets hundreds of e-mails each day.

Because less people click on the links TZOO sends by e-mail, those links will probably start being worth less. This may explain why the company is trying to get out of e-mail as its sole marketing tool and made that experience with giant plasmas in the Las Vegas airport.

I think the idea is great, but it will be difficult to replace the audience the company had with the e-mail. Moreover, it costs a lot more to have plasmas displaying travel deals than sending a bulk e-mail.

2) Expansion plans and competition

Because the US business is slowing down, the company has been spending a lot of money in international initiatives, opening subsidiaries in the UK, Canada, Germany, France, Hong Kong and Japan.

Yesterday I talked to my wife about TZOO as we went for a walk, because she loves traveling so much and subscribed to TZOO's top 20 newsletter (on my invitation). I asked her what she thought about TZOO ... she said she didn't open the e-mail and that there were more appealing services here in Portugal, like one that is called www.lifecooler.com (and several others). Even a government agency has a website doing a similar service as TZOO, which is www.escapadinha.com (with ads on TV and everything else, to promote tourism in Portugal).

And, as you probably know, Portugal is (unfortunately) one of the least developed countries in the European Union. I wonder how many travel newsletters are there in Germany, France and the UK.

Also, the e-mail loss of efficiency exists in Europe as in the US.

3) Main Portfolio is losing again on TZOO

On the first trade I lost 29% on TZOO. Now I'm losing 10%, again. Clearly, the market is proving me wrong, this is more than a short term phenomenon. I've been extremely stubborn on TZOO, and the market is presenting the bill.

More than committed with TZOO I'm committed with the Main's portfolio performance. I figure that just 4 or 5 big losers can kill the performance and my goal of achieving an average annual return of at least 30%.

I already have CIMT on the "hold whatever happens camp", but I'm much more confident with that stock. I don't need another holding of this type.

It is more difficult to assume a mistake after being so strong defending the opposite view. It takes a lot of courage, in my view. I got courage, and right here and right now let me say that I was wrong and I'll sell TZOO today, taking the loss and paying the price.

Good call on TZOO, David. No reason to wait for a golden apple to fall from a tree, just climb up and pick it. You can find more stocks with strories like NVTL's, ICOC's and GSB's.

I don't comment often, but I follow your picks closely.  In my opinion, your track record is exceptional.  I didn't have a good feeling re TZOO, but I bought anyway. It's well worth it to me for you to have a "bad apple" or two in light of all your good choices. Keep up the good work.. it's much appreciated!

Well it looks like you'll be needing to find a new friend to replace TZOO.  I ran a Worden scan to find companies with cap around or under 500m, with revenues, growing EPS, good debt to equity ratio and came up with the following (in no particular order)

TGB EGY OFI SMTX IGTE CBR ABXA CNTY EDGW MEA FLWS OMNI COGO HMIN

I still know next to nothing about fundies, so could adjust the scan if there are other criteria that are also important.  Worden scans are pretty powerful in this regard.

Quote from: TraderStar on July 20, 2007, 12:00:32 PM
Well it looks like you'll be needing to find a new friend to replace TZOO.  I ran a Worden scan to find companies with cap around or under 500m, with revenues, growing EPS, good debt to equity ratio and came up with the following (in no particular order)

TGB EGY OFI SMTX IGTE CBR ABXA CNTY EDGW MEA FLWS OMNI COGO HMIN

I still know next to nothing about fundies, so could adjust the scan if there are other criteria that are also important.  Worden scans are pretty powerful in this regard.

Here is the replacement  ASIA  very nice company 100% at least soon 

this really bytes.
I wish there could be another GOAM like the first time to try to recoup some of the lost.
I could not get into GOAM under 6 like David recomended so I didn't. Now I feel I really need another GOAM to come to the rescue.

TZOO

The first Supports lines are 22,60$(not draw),  21,20$, 20,00$, 17,50$(not draw), 16,50$(2 years bottom).

The TZOO Threads in Previous 3SOF Picks
Have been merged.
Got the go ahead to do so from Ramsburg.
I will be working here on this board to merge other threads also.

I will leave you Friday's closing chart while I'm in this thread....... 

Good trading to all !   

Regards,
Your fellow trader @3SOF
setravis   

BIG move, BIG volume.....

Yes BigSully1,

here is the comment of a Barrons.com Blog columnist...




September 28, 2007, 10:25 am
Travelzoo Jumps On Takeover Speculation
Posted by Eric Savitz
Travelzoo (TZOO) shares are sharply higher today, apparently driven by takeover rumors. The web site TheFlyOnTheWall.com is reporting that the stock is rising "on unconfirmed & renewed M&A chatter."

I have to say: Just who would want to buy Travelzoo is a mystery to me. The company publishes travel newsletters that consist largely of advertising. In fact, just why anyone wants to read the newsletters is kind of a mystery to me as well. Any guesses on potential buyers? And does anyone find the newsletters useful? Let me know.

Travelzoo today is up $1.89, or 9.5%, at $21.78.

Permalink | Trackback URL: http://blogs.barrons.com/techtraderdaily/2007/09/28/travelzoo-jumps-on-takeover-speculation/trackback/

Quote from: phabrux on September 28, 2007, 12:46:22 PM
Yes BigSully1,

here is the comment of a Barrons.com Blog columnist...




September 28, 2007, 10:25 am
Travelzoo Jumps On Takeover Speculation
Posted by Eric Savitz
Travelzoo (TZOO) shares are sharply higher today, apparently driven by takeover rumors. The web site TheFlyOnTheWall.com is reporting that the stock is rising "on unconfirmed & renewed M&A chatter."

I have to say: Just who would want to buy Travelzoo is a mystery to me. The company publishes travel newsletters that consist largely of advertising. In fact, just why anyone wants to read the newsletters is kind of a mystery to me as well. Any guesses on potential buyers? And does anyone find the newsletters useful? Let me know.

Travelzoo today is up $1.89, or 9.5%, at $21.78.

Permalink | Trackback URL: http://blogs.barrons.com/techtraderdaily/2007/09/28/travelzoo-jumps-on-takeover-speculation/trackback/

Up 19% now. Looks like it broke out of a very nice base.

TZOO's "death" came with the death of the e-mail as an advertising channel. Most people receive lots of junk e-mails, so each one of them gets less and less attention. Each has become less valuable for advertisers.

This is why TZOO has been growing less and earning less money. Also because the company is pursuing an aggressive and expensive international expansion, which already brought in many costs and little in revenues.

Anyway, TZOO is doing its best to show its clients proposals to more potential costumers, using other means outside of the internet:

• Photo Release -- Travelzoo Unveils the First Interactive Advertising Campaign in New York City's Grand Central Subway Station
PrimeNewswire (Thu, Jan 10)

It seems that every time they do this the stock recovers some ground, before diving again. The problem with this new approach is that it is a lot more expensive to advertise using giant and interactive TV panels in crowded spaces than it is to send a bulk e-mail. This could hurt the long term profitability of the overall business.

What was that Chinese company which owned thousands of plasmas TV's strategically located in Shangai's crowded spaces to sell as advertising space? It was FMCN. I thought it was overvalued at $72, since I sold it short at that price (obviously, didn't make any money out of it) ... it closed at $48 and change on Friday. Anyway, it could be a nice and new business model for TZOO, but FMCN sells advertising space to any interested client, not just in the tourism sector.

I guess the tough times for TZOO are not over yet, but I'll keep following the stock, I like the way management's interests are aligned with other shareholders interests.

Another poor ER

Quote from: BigSully1 on February 06, 2008, 11:36:37 AM
Another poor ER

Yep.

The stock recovered some ground since then, but the trend remains bearish. Let me copy/paste an analysis from Wedbush Morgan Securities, for example:

Travelzoo (TZOO)
Q4 Earnings Miss (to Zero) on Higher International Spending: Expect More Tempered Results in 2008 Due to Focus On International Expansion; Lowering Price Target to $15

• Q4 EPS significantly below expectations. Revenue was $19 million, compared with our
and the consensus estimates of $20 million. EPS was $0.00, much lower than our estimate of $0.16 and the consensus estimate of $0.14.

• Earnings were negatively impacted by an operating loss of $4.0 million (nondeductible
for tax) for international investments and marketing spending.
Travelzoo's European revenue grew at a fast rate this quarter, but so did its operating loss in Europe (up to $1.9 million from Q3's $1.4 million). We believe this will also be the case as it expands in Asia (which had an operating loss of $2.1 million in Q4).

• We are lowering our 2008 estimates for revenue to $85 million from $89 million, and for EPS to $0.63 from $0.86. We are initiating our 2009 estimates for revenue of $91 million and EPS of $0.75.

• We expect uneven growth to keep Travelzoo shares range-bound. Although revenue and earnings should improve after 2008, we expect uneven performance on a quarterly basis in 2008. It is unclear if or when Travelzoo will benefit from its international investment, and we think that any financial benefits will occur after 2008.

• Maintaining our HOLD rating, but lowering our 12-month price target to $15 from $18, reflecting 20x our 2009 EPS estimate of $0.75. This multiple is in line with the company's expected earnings growth rate of 20% over the next several years. We think that the company will be challenged to grow earnings at greater than a 20% rate, given moderating growth in its core U.S. business and continuing international investments.

RISKS
Risks to attainment of our share price target include slower growth due to worsening macro economic factors, future competition into outbound email travel marketing by large Internet portals, increasing subscriber acquisition costs, and international expansion issues.

RESULTS
• After the market close Tuesday, Travelzoo reported its fiscal Q4 2007 results.
• Revenue was $19 million, compared with our and the consensus estimates of $20 million.
• EPS was $0.00, much lower than our estimate of $0.16 and the consensus estimate of $0.14.
• Management did not provide any financial guidance.
• We are lowering our 2008 estimates for revenue to $85 million from $89 million, and for EPS to $0.63 from $0.86.
• We are initiating our 2009 estimates for revenue of $91 million and EPS of $0.75.

Additional Financial Details on Q4 Results
• Gross profit for the quarter was $18 million, compared with our forecast of $20 million.
• Gross margin for the quarter was 96.1% versus 98.5% last year. We expected gross margin of 98.0%.
• Operating expenses totaled $15.9 million versus our expectation of $15.1 million.
• Operating income was $2.5 million versus our expectation of $4.8 million.
• Net income was about breakeven vs. our expectation of $2.6 million.
• The company had 11.0 million North American subscribers, 1.4 million European subscribers, and 214,000 Asian subscribers to its newsletter (compared with 11.0 million, 1.2 million, and 43,000 last quarter respectively).
• North American SAC (subscriber acquisition cost) was $3.78 (compared with $1.56 in last year's Q4 and $3.92 in Q3) and European SAC was $5.85 (compared with $2.94 in last year's Q4 and $2.96 in Q3), and Asian SAC was $2.90 (compared with $2.23 in Q3).
• The company has recently began operations in China in October and Australia and Taiwan in December.

The company's balance sheet is solid, with $23 million in cash and no debt (compared with $23 million cash and no debt at the end of September).

ANALYSIS
Travelzoo reported revenue about in line with expectations, but earnings were significantly below our and the consensus estimates for the third quarter in a row. Earnings were negatively impacted by an operating loss of $4.0 million (non-deductible for tax) for international investments and marketing spending. Even with the company's reiteration of comments about its international growth having a "material negative impact" on 2007 and 2008 earnings, Q4 EPS were much lower than we expected.

North American revenue grew 6% year-over-year, down from the 23% annual rate posted in Q4 of last year and lower than the 10% in Q3. We believe that the company's North American growth rate will continue to be modest as the company's core product matures. Its European business grew 51% year-over-year, and was down from 67% sequentially from last quarter. SAC decreased in North America ($3.78 from last quarter's $3.92), but increased in Europe ($5.85 from last quarter's $2.96). The company recently started operations in Asia, and has just barely reported revenue (but did incur an operating loss of $2.1 million).

Travelzoo has been expanding rapidly in Europe over the past two years and is still in its investment and start-up phase. The company is now aiming for the Asian market and has opened up several offices throughout the region. We are beginning to question whether Travelzoo is doing the right thing by leveraging its leadership position in the U.S. travel advertising market. Its European revenue grew at a fast rate this quarter, but so did its operating loss in Europe (up to $1.9 million from Q3's $1.4 million). We believe this will also be the case as it expands in Asia. International investments are more costly than we originally expected and we note that any financial benefits will likely occur after 2008.

On the positive side, the combination of relatively stable (though weakening) macroeconomic factors and a continued healthy (though slowing) market for Internet advertising led to a solid quarter for revenue. Internet travel advertising and Internet travel company valuations remain strong, but we have near-term concerns about challenges to revenue and earnings growth given increased competition (e.g., Priceline's Pricebreakers), which may cause share price volatility.

We are lowering our 2008 estimates for revenue to $85 million from $89 million, and for EPS to $0.63 from $0.86. We are initiating our 2009 estimates for revenue of $91 million and EPS of $0.75.

We are now more concerned about earnings growth over the near-term, and revenue growth may be hampered by competition from better-capitalized competitors. As we believe investors are focused on revenue and earnings growth, we believe that slowing or volatile growth rates may keep Travelzoo shares range-bound. However, we also acknowledge that the company has the potential to grow earnings much faster than we have modeled should it moderate spending or European sales accelerate.

We are maintaining our HOLD rating, but lowering our 12-month price target to $15 from $18, reflecting 20x our 2009 EPS estimate of $0.75. This multiple is in line with the company's expected earnings growth rate of 20% over the next several years. We think that the company will be challenged to grow earnings at greater than a 20% rate, given moderating growth in its core U.S. business and continuing international investments.

My comments:

I guess that given the risks to TZOO's business model (still mostly based on e-mail marketing) a p/e multiple of 20 on a 2009 estimate is probably too much to expect (also given the current market environment).

I would like TZOO if the problems were just due to the costs associated with the international expansion, but I guess the most important problem is the less value of the e-mail as a marketing tool.