Travelzoo (TZOO) is a mystery to me right now

By: ispeculatornew
Date posted: 10.06.2010 (5:30 pm) | Write a Comment  (2 Comments)

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Travelzoo is one of the very strong internet stocks. If you do not know the company, it is new generation travel agent. The travel agent that can help you with any of your travel needs when you need to book a flight, a hotel, a car or anything else. It does that through its own website, or other segments such as its Fly.com search engine. That business is solid but it faces stiff competition and I don’t think the company’s offering competes very well with competitors such as Kayak.

The other part of Travelzoo, and most attractive by far is its client base. The online travel agent gets the best travel offers and sends them to its users on a weekly basis which gives those users ideas of where to go and what to do. It has successfully collected the emails of millions of users and is able to fill any unsold inventory if the offer is good enough for the users.

Recently, a website based on a similar concept, Groupon, gained huge traction and has been getting millions of visitors from all over the United States (mainly) that are signing up for the daily offers that are displayed on the local websites. The concept is simple but brilliant and has attracted thousands of imitators already including names such as AOL.

Travelzoo also announced it would be running the concept on its own.

Big deal right? Honestly, I did not think much of the news since I consider it only a small extension of what Travelzoo was already offering. But the stock jumped big time for days and days. I did not understand it and still don’t. I’ve been talking about Travelzoo’s excessive valuation for weeks on the IntelligentSpeculator Premium newsletter


So why didn’t I short it?

As you know, on Monday I initiated a new trade on Amazon (AMZN) and Blue Nile (NILE). That was done despite the fact that I consider Travelzoo to be the most overvalued stock and an easy stock to trade. Why? Because Priceline is in the same business and seems to be priced much more reasonable. But I did not pull the trigger because Travelzoo is too volatile at the moment. I trade with small stop losses and while I am pretty convinced that in the medium term, Priceline will over perform Travelzoo, it is very difficult to go against a huge trend or against a very volatile stock. Right now Travelzoo is both trendy and volatile. I learned that lesson last year while trading Baidu (BIDU) and have been using trend analysis since then to limit the impact.

So what is going on with Travelzoo?

It beats me, it really does. Look at the fluctuations in the past few days. To me, a fluctuation over 4% can happen… but not every other day. Two days ago Travelzoo gained 7,28% and yesterday it lost 9,11%. I did not see any news worth even writing about in either day. That is a bit scary. We are not talking about a penny stock in the mining industry. There is no way the stock should swing this much.

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Now what?

Basically, I will be waiting for Travelzoo investors to calm down a bit, hopefully without taking the stock down with their enthusiasm. When that happens, you can expect me to short the stock. If you want more info about when that will happen, you know where to find it (hint.. IS Premium!).

Do you have any thoughts on Travelzoo’s stock? Do you trade such volatile stocks?

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2 Comments

  1. […] Intelligent Speculator needs to be cured of that insufferable habit of using “needs” as a noun (“see us for all your personal finance blogging needs”), but he does have something interesting to say about a volatile NASDAQ global select travel stock. […]

  2. […] not surprise regular readers and are even more obvious to premium members. I wrote recently about Travelzoo and how its recent movements have puzzled me. The rise of Travelzoo seemed exaggerated but it was […]

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