Post a CommentToday I will be opening a 5th tech stock long & short pick with the portfolio up 3.63% so far this year. After a more difficult start to the year, things are now back and my overall picks are back in the black. Today’s stock pick might look a bit odd as there is very little in common between Facebook and Travelzoo. It’s more of a case of buying a stock I like and shorting one that does seem overvalued at these levels. It’s probably not by luck that one seems like it’s on the cutting edge of where the web is and even where it’s headed while the other seems stuck in a world where Groupon (GRPN) was king.
As is always the case you can see my long & short trades (from 2015 but also past years) here:
http://www.intelligentspeculator.net/livetrades
Let’s start off by looking at the numbers for today’s trade:
| Ticker | Name | Price | PE Ratio | PE Next Year | Sales Growth | Analyst rating | Book Value | Beta | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|
| FB | Facebook Inc | 75.63 | 68.55 | 29.55 | 58.36 | 4.61 | 12.91 | 0.71 | 4.77 | N/A | N/A |
| TZOO | Travelzoo Inc | 9.14 | 11.2 | 38.92 | -10.21 | 3.5 | 2.7 | 0.62 | 9.62 | 6.76 | -12.33 |
Nothing shock here as Facebook has been performing drastically better than Travelzoo in the past few years:
Long Facebook (FB)
Facebook is my biggest single stock holding at this point and I continue to think it’s being managed in such a clever way. While Facebook could do much better in the short term, it continues to focus on user growth and user experience for most of its properties such as Instagram, WhatsApp, FB Messenger, etc. Revenues and profits have still increased significantly thanks to Facebook’s continued success in mobile but overall, I think Facebook continues to work extremely hard on securing its position as an “ecosystem”. There has been very little upside in the past few earnings calls because of the surprise in spending growth but if you think about how early we are in this whole cycle, it makes a lot of sense for Facebook to continue focusing on the long term growth. I do think that if you consider both Facebook and Travelzoo are trading at comparable forward P/E’s, it’s no a brainer which of the two I prefer owning.
Next earnings release: April 23rd 2015
Short Travelzoo Inc. (TZOO)
Well, not shocking to see that Travelzoo has been performing badly. There is little optimism about the company in general. It’s business model has remained fairly stable in the past few years as the companies continues to work on building a mailing list that it can send great travel offers to on a daily/weekly basis. I don’t see much of a transition to mobile or building a community, two of the critical areas to compete with the other big online travel players.
Traffic based on most data that I’m seeing is down. Look at this chart from Compete.com:
It doesn’t look promising and I’d have a tough time trying to imagine Travelzoo’s overall numbers increasing in the next few quarters.
Next earnings release: April 17th 2015
Disclaimer: Long Facebook (FB) and will be opening this trade on today’s open
