Why Travelzoo Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online travel company Travelzoo plunged 12% today after its quarterly results missed Wall Street expectations.

So what: The stock has slid in recent months on concerns over slowing growth, and today's Q3 results -- adjusted EPS fell 10% on a top-line increase of just 5% -- only reinforce that worry. In fact, shares of close rivals TripAdvisor and Expedia -- which will both report later this month -- are also showing a bit of weakness today as investors speculate on similarly weak results.

Now what: Management remains optimistic about its growth initiatives going forward. "We continue to invest in product development in order to make it easier to find and book deals on Travelzoo and to spur future growth," said CEO Chris Loughlin. "We launched a new home page this quarter and intend to start beta-testing our new hotel booking platform at the beginning of next year." However, when you couple the strong margin headwinds facing Travelzoo with the stock's somewhat rich P/E of 20, I'd wait for an even wider margin of safety before buying into that bullishness.

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The article Why Travelzoo Shares Tumbled originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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