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The analyst covering Travelzoo (NASDAQ:TZOO) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook – perhaps a sign that investors should temper their expectations as well.
After the downgrade, the consensus from Travelzoo’s sole analyst is for revenues of US$49m in 2020, which would reflect a concerning 52% decline in sales compared to the last year of performance. Losses are expected to turn into profits real soon, with the analyst forecasting US$0.16 in per-share earnings. Prior to this update, the analyst had been forecasting revenues of US$116m and earnings per share (EPS) of US$0.72 in 2020. Indeed, we can see that the analyst is a lot more bearish about Travelzoo’s prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it’s the idea that Travelzoo’sdecline is expected to accelerate, with revenues forecast to fall 52% next year, topping off a historical decline of 6.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 16% per year. So while a broad number of companies are forecast to grow, unfortunately Travelzoo is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Travelzoo’s revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn’t be surprised if the market became a lot more cautious on Travelzoo after today.
Worse, Travelzoo is labouring under a substantial debt burden, which – if today’s forecasts prove accurate – the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.