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The Best E-Commerce Stock for 2007: The Knot

Come November, my wife and I will have been married for 10 years. On the whole, it's been a wonderful decade. But the beginning? That's another story.

Wedded bliss doesn't come easy
It was hard at first. Not our relationship -- our wedding. My bride-to-be decided to manage the event, and within days of our engagement, she was overwhelmed.

We didn't have the cash to hand the reins over to a professional wedding planner, so we had to seek out software that would help us plan the event. There wasn't much available; this was 1997, after all.

What my wife ultimately chose was helpful, in that it organized tasks and helped her to track vendors. But she still did all the research. There was no expert guide to show us who to go to and why.

Tying the knot with The Knot
Fast-forward to today. Weddings are still a massive industry -- couples spend roughly $72 billion annually on The Big Day.

And planning hasn't become any easier. TV shows depicting the horror of weddings have become pop-culture fodder. "Bridezillas" may be too much for me, but it's still a hit show for the WE network.

Against this backdrop, you've got The Knot (Nasdaq: KNOT  ) , one of my favorite picks from Foolish friend Rick Munarriz for Motley Fool Rule Breakers. The Knot is the top site serving engaged couples, with 3.2 million unique visitors a month and 3,000 new members every day.

All these couples have money to spend. The average wedding runs more than $20,000, after all. Maybe that's why the Fools following the stock in our Motley Fool CAPS investor intelligence database are in love:


The Knot

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Notes: Data current as of Jan. 23, 2007

Someone to lean on
Or maybe it's the uniqueness of the service. Fellow Fool Sam Moore Cicotello, known in these parts as TMFShortcake, explains in her CAPS pitch:

"I loved The Knot when I was getting married for one main reason -- COMMUNITY. Much like The Motley Fool -- I felt like it was a place I could trust in an industry that was trying to swindle me. I loved that I could trade information about planning and vendors in my own town. I visited several times a day for 8 months and I point all brides that I meet to the site because it was so helpful."

That's a powerful endorsement, and it's a testament to value creation in the digital age via network effects. Like eBay (Nasdaq: EBAY  ) or Yahoo! (Nasdaq: YHOO  ) , The Knot's value increases with each new member.

Get in the game!
That, in turn, has created growth. Surging 272% annually over each of the last three years, net income has expanded faster than Fat Albert's waistline after a steady diet of wedding cake.

Can the torrid pace continue? I doubt it. But with analysts projecting that the bottom line will grow by 40% annually over the next five years, The Knot is still very much a fast mover. And it could be reasonably priced, too -- Capital IQ says the stock trades for 38 times fiscal 2007 earnings.

Yet The Knot really stands out as the best e-commerce stock for its place in a timeless industry. Brides will always need help preparing for The Big Day. They'll want tools and advice from those who've already been down the aisle. Thanks to network effects, The Knot has that and a lot more.

Still, I don't get to decide this contest. You do. If The Knot is your choice, click here to rate the stock as an outperformer against the S&P 500. If you disagree with my thesis, rate the stock to underperform.

Beginning today, our editors will be tallying your ratings for all the stocks competing. The one you're most bullish about will be declared the winner. Ready to get in the game? Click here now. It's 100% free to participate in CAPS.

See all our Foolish candidates for 2007's best e-commerce stock, then add your own ratings in Motley Fool CAPS.

The Knot is a recommendation of the Motley Fool Rule Breakers stock-picking service. To get a closer look at all six stocks that have more than doubled since this market-beating service began two years ago, ask for us a free all-access pass.

Fool contributor Tim Beyers, ranked 660 out more than 20,600 in CAPS, only breaks the rules in his portfolio. Wimp. Tim didn't own shares of any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. eBay and Yahoo! are Stock Advisor recommendations. The Motley Fool's disclosure policy is a partner you can count on.

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