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October 15, 2004 Stock Pick: Travelzoo, Inc. (TZOO)

Stock Price: $62.37 (short-term strong short)

We most recently released TZOO as a stock pick on September 17th when it was at $72.34. By October 8th it fell to a low of $49.88. TZOO jumped this week on a three fold increase in their quarterly profit; however, the fact is that they are only making $9.1 million a quarter. They do not deserve to have a market cap of close to $1 billion.

Travelzoo, Inc. is the Internet's largest publisher of travel offers available directly from hundreds of travel companies. They currently list more than 300 travel advertisers to over 7 million subscribers.

There was a $30 million private placement in the form of a PIPE to a group of institutional investors that took place about two weeks ago. TZOO shares in this deal were priced at $40. This just shows how overvalued TZOO has become.

Many traders bought on the rumor of a third quarter profit and some bought more when earnings were released. It appears that volume is dropping again.

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