Ahead of the Bell: Travelzoo

AP News
Posted: Oct 15, 2012 8:58 AM
Ahead of the Bell: Travelzoo

NEW YORK (AP) — An analyst on Monday said shares of Travelzoo Inc. are headed for more tough times ahead following a warning by the travel deals website that its third-quarter results will tumble from a year ago.

Travelzoo's stock dropped to the lowest level in more than two years on Friday after it forecast that its third-quarter profit would shrink about 40 percent from a year ago. It blamed its hotel search and group-buying offerings, which didn't spark traveler interest as much as it anticipated. It said it's changing its hotel business to try and gain more ground.

But that might not be enough, said Daniel Kurnos of investment firm Benchmark. While a new marketing plan is critical to the company's continued growth, he believes Travelzoo will have a hard time buying or developing a quality hotel booking website given tough competition from companies like Expedia Inc. and Priceline.com Inc.

The analyst said that while he believes a weak global economy is partly to blame for Travelzoo's disappointing outlook, the culprit is mostly the company's failed initiatives. Despite a broad sell-off by nervous investors on Friday, the analyst doesn't think Travelzoo's woes are a sign of bad things to come for rival companies.

The stock dipped 12 cents to $19.90 in premarket trading Monday. Over the past 12 months, shares had ranged as high as $34.95. They hit a low of $19.34 on Friday, and are down by nearly a third over the past year.