Yes, TravelZoo stock was one of our better recommendations. We were bullish on TZOO back in 2010, after the company divested its Asian operations. Subsequently, the stock price soared because of renewed profitability due to the divestiture, but also because of the company's Daily Deals venture and the hype surrounding Groupon. However, in the last year the stock has again declined dramatically. In April 2012, as the stock hit around $20, a rumored surfaced that Travelzoo was in talks to be acquired. The list of potential buyers could include Amazon and Google, which bought travel technology company ITA Software last year.
In terms of the possibility of a sale, we do not know whether the rumors are true, but it would seem that a takeover of TZOO is not that farfetched. As such, at current prices, TZOO's stock is a decent gamble (Disclosure: We are long TZOO). There is an enormous Internet bubble that has now formed and is still in the process of developing. With Silicon Valley awash in cash from recent IPO's and frothy private markets, it's quite possible some company will be interested in TZOO at current prices. The company has a large subscriber base, a proven and profitable businesss model, and a valuation which appears inexpensive on a relative basis when compared to other start-up Internet companies, like Groupon. At the same time, TZOO's largest shareholder, Ralph Bartel, is probably itching to sell the company and extract the largest value possible. He missed selling out during the first bubble, and probably won't want to miss this second opportunity to unload TZOO.
We would note, however, that TZOO has an extensive European presence and has bet its future heavily on growth in Europe. As such, if the European financial crisis continues to deepen, this will have negative repercussions for TZOO. Of course, this is not really a TZOO-specific risk, as the entire Market seems fixated on Europe, but we think that TZOO could suffer disproportionately from a deepening European crisis.
