Kayak, SideStep, and Why TravelZoo is a Bargain

January 4, 2008 at 7:30 am Leave a comment

TravelZoo’s (TZOO) stock price should be 82% higher than its current price of $13.54.  I won’t hit on TZOO’s fundmentals, rather I’ll focus on a recent merger in the internet travel space.

Kayak.com recently purchased SideStep.com for $200 million dollars.  Both companies are within the travel search space, which would be loosely definied as a search engine for airline, hotel, and car rental prices.  These two companies represent the #1 and #2 players in the space, with Farecast a distant but growing #3.   You can read more about the merger in a very insightful analysis at Compete.com and TechCrunch.com.   

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Using data from Quantcast.com, I know that SideStep.com had approximately 3.3 million unique visitors in the last 30 days.  Using the $200 million number reported in the press, that would value SideStep.com at $60.61 per unqiue visitor.  Applying this value of $60.61 per unqiue visitor to Kayak.com ($254m valuation), one could potentially assume that this was a merger of equals rather than a bigger company taking out a smaller company. 

Note that their are definite faults with my logic, specifically I’m only looking at the unique visitors numbers rather than revenue, ad rates, conversion rate, etc…  With that said, let’s go back to my original statement that TZOO is worth $24.76 a share (an +82% gain from today’s close).

Based on results on Quantcast, in the past 30 days TravelZoo.com has seen over 5.8 million unique visitors.  This trumps the traffic seem on both Kayak and SideStep, and is probably close to the total number of unqiue visitors between both sites.  Using the $60.61 per unique visitor Kayak paid for SideStep, that would value TravelZoo at $351 million or $24.67 a share.  In terms of revenue TravelZoo recorded over $77 million dollars in its most recent fiscal year while SideStep is reported to have generated $35 million in revenue.  

One of the biggest gems to TZOO is the 13 million plus opt-in email addresses they’ve collected through the years.  Let’s assume that only 6.5 million are active, you are still only paying $29.23 per email address at current valuations, and that is assuming the rest of their business has no value, which is not the case. 

Disclosure:  I own shares in Farecast and will most likely be buying shares of TZOO in the next couple of days

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Entry filed under: Airlines, Investing, Travel Search Engines.

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The comments expressed here on eccoBay are my own and do not necessarily reflect the opinions or beliefs of my employer.

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