LoopNet (Nasdaq: LOOP ) CEO Rich Boyle is like a box of chocolates. When he speaks, you might get a delicious bit of wit and insight -- or a mouthful of overly optimistic prattle. It's up to us Fools on the street to sift the tasty truffles from the bitter cocoa butter.
The commercial real estate specialist just reported fourth-quarter earnings of $0.12 per diluted share, on sales of $21.1 million. Revenue was 8% higher than the year-ago quarter's, but net profits dropped by $0.02 per share.
Given the well-documented real estate upheaval of 2008 (and what is expected to come in 2009), that looks pretty solid. The residential housing market may be in deeper dung than the commercial one, but industry leaders like Kimco (NYSE: KIM ) have started to lose money now. LoopNet's direct rivals in information and listing services are doing the same, including well-respected operators like Motley Fool Hidden Gems recommendation Stewart Information Services (NYSE: STC ) . Yet LoopNet barely lost a step from 2008.
And that's where Mr. Boyle's mixed cup of wisdom and folly starts to run over. Here, sample some of his deliciously witty wordplay: "We said that we were entering an uncertain 2008, and it certainly turned out to be one."
And here's some incisive, actionable wisdom: "The most likely catalyst to drive market prices lower -- and eventually see transaction volume increase -- will be properties needing to be refinanced in this market, as well as motivated sellers who are seeing cash flow deteriorate and asset prices fall, potentially facing a refinancing requirement."
Here, he's helping us understand the difference between his twin target markets:
- There are the "for-sale transactional users, both listers and searchers, who are simply not active in the market right now."
- But "listers on the for lease side of the system are in a bright spot with good growth driven by an increasing supply of listings."
Unfortunately, I think the last quote is also an example of LoopNet's failings. Commercial leases may be on the rise now, since fewer business owners can afford to buy their buildings outright. But I fear that this apparent trend is a mirage -- an illusion of safety that will pop when even lease deals become untenable.
Now, I could be wrong. Feel free to tell me why in a CAPS comment on LoopNet, before you go on to invest in this dual newsletter pick. But it sounds like management is not prepared for the commercial real estate bubble to pop just as hard as the residential one. That makes LoopNet very unappetizing to me. If the worst comes to pass, American businesses might soon have to turn to Craigslist or eBay (Nasdaq: EBAY ) for their real estate needs.
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