TZOO - Sector: Services---Industry: Internet Information Providers

[soxguy]

Nuts.

[dnickers]

Well, I think you can all thank me for this.  I decided to sell my GIGM and in turn pickup TZOO.  This always happens...

[Se7en]

down 17% AH! 

[David Randolph]

TZOO's investments in Europe and Asia are hurting the business profitability over the short term and still not contributing for growth, because they're incipient. This seems like one of those cases where the sell off is a buying opportunity, since it is caused by a short term negative effect of a sound long term business strategy.

My share price CAGR estimate was perhaps too low, or my estimates were too stretched, and maybe this can explain the loss. My wife was suggesting here that I should have not only an "optimal selling price" but also an "optimal entry price", but I'm not sure how can I do that without considering short term information that can sometimes be contradictory with the long term fundamental analysis.

Well, I think you can all thank me for this.  I decided to sell my GIGM and in turn pickup TZOO.  This always happens...

That was really bad luck dnickers, why did you exchange a stock with such a comfortable expected rate of return like GIGM, one of our top 3 holdings in terms of its quality, for TZOO? Anyway, don't worry too much about short term setbacks, they're inevitable and you need to be psychologically prepared for them, losses are part of a winning long term strategy.

Over the intraday I felt something like this could happen, but I know feelings won't take me anywhere over the long run. If TZOO goes down 20% tomorrow that will mean a 1.2% or so loss for the Main Portfolio, which is bad, but not dramatic.

I'll do my update later, just making a few quick remarks on the situation. The stock will probably open around the red medium term support line on the chart below:

[wxmang]

"If TZOO goes down 20% tomorrow that will mean a 1.2% or so loss for the Main Portfolio, which is bad, but not dramatic."

This is the kind of discipline we tend to forget

David is totally right.... only 1.2% or so loss..
Not a big deal.

As a matter of fact, I have a very low Limit Buy Order for more TZOO tomorrow morning.
This purchase amount would be what I intend to lose Intraday tomorrow.
I think it is smart, because this looks like a monster over-reaction.
TZOO missed the number but they are a profitable company trying to grow.

However, I will look forward to David's updated model run on TZOO.

And who knows, SILC might counter the loss tomorrow after earnings..
Something to think about

Wxmang

[soxguy]

I would love to buy more in the morning and wait for a recovery,but not if it's  going to $20 first.

[yukiii]

[/quote]
My share price CAGR estimate was perhaps too low, or my estimates were too stretched, and maybe this can explain the loss. My wife was suggesting here that I should have not only an "optimal selling price" but also an "optimal entry price", but I'm not sure how can I do that without considering short term information that can sometimes be contradictory with the long term fundamental analysis.
[/quote]

I don't agree with your selling price they are miss-leading. With these type of stock you can't trust future earnings to much. I would just look at past earnings and the next few quarter out and come up with a selling price. To many things can happen, to many setbacks.
on SILC I would have set a optimal selling price of around $30.00 not $131.00
GIGM $24.00 not $57 on a stock like TZOO  I didn't buy it, I only came up with a value of $24 - $30 before earning came out some it was overvalued.
NTES $24 and etc....

[nicknite20]

yukii, depends on what ur time horizon is..

GIGM & SILC are both buy&holds for now.

I see GIGM earning close to 0.90 this year. Depends what multiple you want to give a co growing 40-50% a year.. but even with a conservative PE of 30, we're looking at 27 by end of 07 on trailing earnings.

Im long GIGM since 6..and there are a lot of intangibles that are not factored in..the management team for instance..wang&hui really know how to deliver.

The US ban really put a speed breaker on its share price momentum last year..but its put it behind and is up over 50% since then.

I agree with David..barring some major regulatory impact in Eu / China..GIGM will continue to reap rewards for the patient holder.

[tokyopua]

My share price CAGR estimate was perhaps too low, or my estimates were too stretched, and maybe this can explain the loss. My wife was suggesting here that I should have not only an "optimal selling price" but also an "optimal entry price", but I'm not sure how can I do that without considering short term information that can sometimes be contradictory with the long term fundamental analysis.
[/quote]

Not sure if you would have to do that or as you say, how you even could do it.  But it might be a better idea just not to buy too close to earnings in order to give your ideas time to bear fruit (making any drop on earnings sting less) and allow more time for any more negative information to be uncovered.

[David Randolph]

Just heard Travelzoo's Q1 2007 results conference call.

Revenue growth in North America was just 13%, but in Europe it was 128%. I believe that over time Europe can be an even bigger market than North America, simply because citizens of the European Union are 500 million compared to 330 million in North America.

Revenues from North America were $18.5 M and just $1.3 M from Europe, so you can see Europe's growth potential. The company also recently expanded to Asia as it opened an office in Hong Kong.

EPS was $0.25 in Q1 2007, up just 1 cent from Q1 2006. But this is because Europe is still incipient and losing money (it had an operating loss of $683,000). In the not so distant future (say, 3 years from now), I don't see why Europe shouldn't be as profitable as the company's North America operations. Also, net income was hurt by an higher effective tax rate, because losses in Europe don't offset profits in the US. When the European unit gets profitable it will enjoy a lot of tax loss carry forwards, that will leave the company exempt for some years to come, increasing profitability over the medium term.

I enjoy the company's growth initiatives a lot, expanding from four basic sectors: flights, hotels, cruises and car rentals to show and events tickets. They're also starting to differentiate advertiser's revenue with video add ons.

Overall I see no reason to change my long term estimates due to this weak quarter, since this seems to be a necessary short term pain that will lead to more long term growth and success.

Of course, I should have waited to buy after the bad news, since it was more or less obvious this quarter was going to be bad, due to the company's big investments in Europe and Asia. I have to be more careful in the future on the timing of entry, not because of technical reasons, but due to short term fundamental possibilities, like Tokyopua rightly said.

As I see it today's open will only make the stock more attractive on a long term investor's perspective, because long term fundamentals didn't deteriorate:



I still see 30% compound annual revenue growth between now and 2009 (mostly due to Europe and Asia growth) and a 30% net profit margin.

Technically TZOO has been trading in a wide range, between $25.5 and $40. The medium term support line (red on the chart) will stand at $30.41 today.

I'll keep holding TZOO despite today's horrible setback.

[JKN]

I'm no expert on Europe but I've always heard that Europeans typically get more vacation time than Americans.  Seems also that European stocks are doing well (collectively) based on the the last few years.  Would seem to be an excellent market for travel-related business?

Perhaps folks will have a bit more spending money than in the past, feel wealthier,  and decide to use TZOO.

BTW, it seems really strange to see TZOO tank (and me not dump it)  and it only effect my portfolio by a couple %.  I somehow feel liberated !!!

Kent

[cumulina]

Todays drop gave me a chance to get in @ 28.1699

I'm a little slow, but sometimes that is lucky!

[yukiii]

Todays drop gave me a chance to get in @ 28.1699

I'm a little slow, but sometimes that is lucky!

I would wait till it gets lower to buy $25.00

[Kublakhan]

Here is a fool article with an optimistic look at the future of TZOO

http://www.fool.com/investing/general/2007/04/25/the-world-is-flat-at-travelzoo.aspx

[David Randolph]

I'm no expert on Europe but I've always heard that Europeans typically get more vacation time than Americans.  Seems also that European stocks are doing well (collectively) based on the the last few years.  Would seem to be an excellent market for travel-related business?

Perhaps folks will have a bit more spending money than in the past, feel wealthier,  and decide to use TZOO.

BTW, it seems really strange to see TZOO tank (and me not dump it)  and it only effect my portfolio by a couple %.  I somehow feel liberated !!!

Kent

I agree Kent, people in Europe love to travel and have the time and money to do it. TZOO shall have a warm welcome here.

Here is a fool article with an optimistic look at the future of TZOO

http://www.fool.com/investing/general/2007/04/25/the-world-is-flat-at-travelzoo.aspx

I agree with the Fool's article.

TZOO had a very, very ugly technical breakdown yesterday. But there are more supports around the current area, I don't think prices below $25 are a possibility, the stock would be too cheap at those levels. So, people selling nos are selling approximately at the lows for the foreseeable future, because things can only get better in Europe and Asia. Even for tax reasons, EPS will probably grow from the current $0.25 a quarter.

TZOO's clients, like online travel bookings companies Priceline, Orbitz and Expedia are doing very well. Hotels are also doing well. Car rental companies too. I don't see why they would cut on advertising spending at TZOO.

I have a 28% loss in TZOO, but I'm going to keep my long term estimates and I still see the stock at $112.69 in 2009, so I'll keep on holding the stock throughout this short term storm.