Wednesday, April 11, 2012

Travelzoo (TZOO) - Firm Announces It's Up For Sale; Stock Down 65% YTD; Vol Pops, But Still Depressed?

TZOO is trading $27.05, up 28.4% with IV30™ up 4.9% as of ~10:10am EST. The Livevol® Pro Summary is included below.


Click for Free Trial


Travelzoo Inc. (Travelzoo) is a global Internet media company. The Company informs approximately 24 million subscribers in North America, Europe and Asia Pacific, as well as millions of Website users, about the travel, entertainment and local deals available from thousands of companies.

The stock is up on news that it’s putting itself up for sale, which tends to push stocks higher for what reason I have no idea… Here’s the news:

Struggling online travel company Travelzoo(TZOO_) is reportedly considering an outright sale, as weakness in its core travel-related advertising revenue led to an over 70% stock drop in the last 12 months.

Travelzoo is in the process of hiring a financial adviser, as the company looks for an acquirer of its Web and newsletter businesses that link vacationers with flight, hotel and resort deals, according to a Reuters report, citing three unnamed sources. Private equity firms, including Permira, and online travel company ODIGEO, have already shown takeover interest in Travelzoo, the report said.

Source: TheStreet via Yahoo! Finance -- Travelzoo Shares Surge on Sale Report, by Antoine Gara.

Just to be clear, the stock is down 70% on core business weakness and now that the company is up for sale the valuation is up 30%. OK…

Let’s turn to the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

The stock chart over the last six months doesn’t really show a lot of movement as the stock has been relatively range bound. The real stock drop is relative to a one year window where the 52 wk range is [$20.68, $103.80]. The stock closed at $21.06 yesterday, so very close to its annual low. Then today happened…

On the vol side, we can see how the implied has been nearly 140% over the lat six months, but now is in the low 60’s. We can see how the implied does tend to trade above the short-term historical realized vol (HV20™). Having said that, the longer term HV180™ is 72.43%, and that does not include the move today. The 52 wk range in IV30™ is [50.04%, 160.01%], putting the current level in the 10th percentile.

Let’s turn to the Skew Tab to examine the month-to-month and line-by-line vols.

We can see a monotonic vol increase from the back to the front across the front three expiries. There’s an upside bend to the OTM calls in the Apr and Jun cycles, oddly not in May, though. The next earnings release for TZOO is ambiguous. It could be either at the end of the Apr cycle, or at the start of May… tricky… For the last two years the earnings date in calendar Q2 has been 4-26-2010 and 4-21-2011. For the record, Apr expo is Saturday 4-21-2012. It’s difficult to back out the earnings date from the vols as the news today sort of supersedes the vol in the earnings event.

Let’s check out the Options Tab for completeness.

I wrote about this one for (OptionsProfits), so no specific trade analysis here. The vols by expiry are 70.67% and 61.88% for Apr and May. You can see there’s a projection of earnings in Apr, but that’s pretty iffy, so in a sense, I’d pretend that’s not even there.

Ultimately the idea of a firm going up for sale is not good news IMHO – management wants out, how is that good? Take TZOO in particular, with what appear to be substantial struggles in the core business (or at least core advertising), and at the very least vol in the 10th percentile (annual) feels... weird... I do note that the firm has positive earnings and a fair amount of cash on hand, so it doesn’t appear to be at risk as a going concern.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment