Why Trulia's Shares Soared

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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 real estate marketplace Trulia (NYSE: TRLA  ) were flying high after the company's initial public offering, gaining as much as 47% in the opening day of trading.

So what: Take that Facebook! Though there's been plenty of talk about investors eschewing IPOs after Facebook's gnarly performance, the skyrocketing Trulia shares seem to be telling a different story today. The timing for Trulia seems to be pretty perfect. The business pages are sprouting lots of stories about a resurgent -- or, at least, maybe-recovering -- real estate market, and investors can drool over the fact that Zillow's (Nasdaq: Z  ) shares have practically doubled over the past year.

Now what: I can't say I've ever been much of a fan of buying into IPOs, and that has nothing to do with Facebook. In the case of Trulia, growth has been a prominent part of the picture, but profits have not. For the first six months of this year, revenue jumped 79% from the same period a year ago, but losses nearly tripled. Ideally, further top-line growth would wash out that red on the bottom line, but it's not like this is an uncontested sector. Notably, Zillow was unprofitable when it went public, and it's now profitable.

As far as the comparison to Zillow goes, investors should bear in mind that Zillow's shares had a huge pop on the day of the IPO, but then slid nearly 40% in the six months that followed.

Investors are obviously excited about Trulia today, but this Fool will not be part of the feeding frenzy.

Want to keep up to date on Trulia? Add it to your watchlist.

The Motley Fool owns shares of Facebook and Zillow. Motley Fool newsletter services have recommended buying shares of Facebook and Zillow. 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.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.

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