Seeing 'Faint Signs Of A Turnaround' At Travelzoo

• The share price of Travelzoo Inc. (NASDAQ: TZOO) has declined 14.22 percent year-to-date, almost touching its 52-week low on Thursday at $6.68.
• Benchmark’s Daniel L. Kurnos has maintained a Hold rating on the company, while lowering the price target from $11 to $8.
• Although the company reported disappointing results for 4Q15, Kurnos believes that management’s tone during the earnings call was more optimistic than it has been for several quarters.

Analyst Daniel Kurnos mentioned that Travelzoo missed the consensus revenue expectations by $1 million, primarily driven by its Search business. The EBITDA outperformance, however, was driven by lower Sales and Marketing spend.

“However, while results followed the historical playbook, we believe the conference call featured a noticeably more optimistic management team for the first time in several quarters, and felt management was taking the appropriate steps to return the Company to a growth trajectory,” Kurnos stated.

However, Kurnos prefers to remain on the sidelines at present, given that significant execution risks still remain for Travelzoo in a very uncertain macro environment, although the longer-term outlook for both the company’s core travel and hotel bookings platforms appears more positive.

The company has guided to 2-5 percent FX-neutral growth in the Travel segment during 1Q16, with expectations of acceleration through the remainder of the year and a more positive outlook for the Local business in 2H16.

According to the Benchmark report, “With several replatforming efforts underway, including an already noticeable cleanup process, along with an apparently loyal user base of over 28.4 million subscribers, we believe Travelzoo could be well positioned to evolve into a more social offering, which would resonate well in the current marketplace.”