Have you ever met a "perfect" stock? If not, allow me to introduce Motley Fool Hidden Gems recommendation LoopNet (Nasdaq: LOOP). According to Earnings.com, this eBay (Nasdaq: EBAY) of commercial real estate has never missed an earnings target in its short public-market history. Tomorrow, the company tries to keep its streak alive as it reports Q4 and full-year 2007 earnings.
What analysts say:
- Buy, sell, or waffle? Half a dozen analysts take a loupe to LoopNet, giving it twice as many buy ratings as holds.
- Revenue. On average, analysts expect to see quarterly sales rise 39% to $19.2 million.
- Earnings. Profits are predicted to shed a penny, dropping to $0.12 per share.
What management says:
Based on the above, it looks like analysts were only listening to LoopNet's last quarterly report with one ear. Or perhaps they tuned in late (twice), only hearing the top-o'-the-range predictions management gave for Q4 performance. In fact, LoopNet itself says its earnings could as easily be $0.11 as $0.12, while revenue will range from $18.9 million up to $19.1 million. Wall Street's optimism sets up LoopNet investors for a tumble if the company "misses" these estimates tomorrow. Still, I can't fault the analysts for wanting to live on the sunny side of the Street.
What management does:
Speaking of sunny, LoopNet boasts margins that will absolutely warm your heart. While the net has come down a bit now that the company is again paying income tax on its profits, we're still looking at a firm that's more profitable than any companies that might be sniffing around to boost their own margins. Google (Nasdaq: GOOG)? Yahoo! (Nasdaq: YHOO)? One's in the 20s for net margin; the other's not. I'll let you guess which is which. Either might be interested in LoopNet's more profitable business line.
|
6/06 |
9/06 |
12/06 |
3/07 |
6/07 |
9/07 | |
|---|---|---|---|---|---|---|
|
Gross |
88.2% |
88.3% |
88.4% |
88.5% |
88.7% |
88.8% |
|
Operating |
42.1% |
42.0% |
43.7% |
43.0% |
42.2% |
42.3% |
|
Net |
52.8% |
48.3% |
32.0% |
31.8% |
31.7% |
31.9% |
One Fool says:
That, incidentally, is probably the main problem with this stock: Potential competition. As fellow Fool Rick Munarriz intimated in last quarter's update, now that LoopNet has bought out its nearest competitor (the new "nearest" is a firm called CoStar Group (Nasdaq: CSGP), by the way), LoopNet's got serious pricing power on its side. Exercising that power by jacking its rates 17% over the past year is likely cutting into its growth, however.
More seriously, though, the ability to jack up rates in a tough economy, combined with the superb margins LoopNet's already boasting, seem likely to attract intense competition from the titans of Internet advertising. Keep a close lookout for slowdowns in premium subscriber growth at LoopNet tomorrow. Keep a closer lookout for news that Google or Yahoo! is making serious efforts to cut LoopNet's rise short.
