It was back in June that LoopNet (NASDAQ:LOOP), a Motley Fool Rule Breakers recommendation, had its IPO. It was a tough time to go public, given the extreme bearish sentiment and the horrible debut of Vonage (NYSE:VG). Yet investors were still willing to buy up the stock at $12 per share. Since then, the stock has had a nice rally, reaching about $17. And, based on its market position and competitive advantages, the company's potential looks particularly strong for 2007.
In a way, LoopNet has mimicked the approach of eBay (NASDAQ:EBAY) and built an online marketplace for commercial real estate. You will find thousands of listings for office, industrial, retail, and multi-family properties.
But isn't real estate in the dumps? Well, that is the case for the residential market, but commercial real estate has actually been quite strong. Rents have been steadily increasing because of continued economic growth in the U.S. and the difficulty of building out new properties (because of government regulations).
And big-time real estate investors see the growth continuing. After all, look at Vornado Realty Trust's (NYSE:VNO) $21.6 billion offer for Equity Office Properties (NYSE:EOP). Before this, savvy private equity firm the Blackstone Group made a $20 billion offer for the company.
The numbers
LoopNet is certainly benefiting from the industry growth. In the fiscal third quarter, revenues surged 52% to $12.7 million and registered members rose 58% to 1.6 million.
The company has a variety of ways to make money. For example, there is a premium membership, which has garnered about 76,000 users. Other revenue sources include advertising and lead generation, such as for commercial lenders.
While there are some competitors, they are primarily old-media players, such as magazines, newspapers, and some online databases. Moreover, their approach is to have teams collect the property listings. LoopNet, on the other hand, has a sophisticated system that allows its brokers and property owners to list the properties. This self-service approach means avoiding the heavy costs of data collection.
The takeaway from CAPS
The Motley Fool CAPS community has a bullish take on LoopNet, giving it a four-star rating. There are currently 80 outperforms and only four underperforms. As for the CAPS All-Star players, there are 34 outperforms and one underperform.
CAPS member kwfisher, who is a commercial real estate broker, writes that LoopNet is "the choice of both commercial brokers and private buyers for sourcing commercial real estate acquisitions and sales." Several other CAPS members are satisfied members of LoopNet.
Something else the CAPS community has highlighted is LoopNet's "network effect." It's a virtuous cycle: Brokers and property owners are attracted to the site because of the large number of buyers and tenants. In turn, the buyers and tenants are attracted to the marketplace because of the broad selection of listings. So the network should get more and more valuable.
Takeaway
For an e-commerce play, LoopNet has a lot to like: a strong brand in its space, a low-cost structure, and multiple sources of revenues. And there is still room for growth, as the U.S. commercial real estate market is about $5 trillion.
If you like the prospects for LoopNet, let us know on CAPS and provide a rating or even a review. And if you have doubts about its prospects, let us know that as well.
See all our Foolish candidates for 2007's best e-commerce stock, then add your own ratings in Motley Fool CAPS.
Fool contributor Tom Taulli does not own shares of companies mentioned in this article. eBay is a Stock Advisor selection. The Fool has a disclosure policy.
