LoopNet, Inc. (LOOP)

Loop is the big gorilla of commercial space at the small end and even more in a recession people want to compare

Super bargain right now. I bought this entire loss this week all the way down to the part where the positive earnings came out. Haha

Looks like my favorite online real estate dealer is going to be releasing some results this week. This is going to be good. Terrible sector at the moment but a wonderful company that is going to be doing way better compared to the rest. Also reselling of real estate is one of the only parts of the real estate market booming right now after such a long drop in real estate. I'm ready to ride the wave back up.

Foolish pick - 10/09

I know this company has $2.70 per share in cash on its balance sheet. I know it has no debt. I know it has a light business model.

It's getting to the point where none of this matters. They make most of their money from paying subscribers, which are declining consistently every quarter. Last quarter, they lost 4% of their subscribers. Paying subscribers were down 18% year over year to 71,375 individuals. Last quarter they made $0.04 per share in earnings.

They are losing critical mass on their subscriber base, and it looks like they are about to go negative on earnings over the next quarter or two.

The stock is up over 4% today. It's as good a time to go "thumbs down" here as ever. Commercial real estate is no where near recovering any time soon.

Commercial Real Estate heating up. IRS mods of CMBS loan modifications could really help LOOP.

when the real estate market picks up, they will be in a good position

The commercial real estate market is in for worse than the residential real estate market is going through. Sorry, guys!

LoopNet raised $50 million in expensive convertible preferred stock to "accelerate our growth strategy", according to the company. I challenge anyone to suggest a meaningful growth strategy or company LoopNet could buy to accelerate their growth strategy?

They could buy Xceligent for maybe $15 million and invest $35 million to try to compete with CoStar. This is not a growth strategy. Xceligent is a loser of a business model and CoStar has spent 20 years and more than $1 billion researching commercial real estate to develop their market-leading database. It will cost LoopNet tens -- if not hundreds -- of millions of dollars and years of work to go head-to-head with CoStar. LoopNet could try to aggregate more listings from NAR by partnering with Move.com. Partnering with Move.com / NAR to aggregate residential listings is not a growth strategy. They could try to buy an analytics company, like REIS, for $50 million. Although, REIS management turned down an offer by CoStar in August 2008 valuing the company around $100 million. And, combining REIS and LOOP does not accelerate any clear growth strategy. I also question if there would be any meaningful synergies.

I believe the LoopNet is preparing for severe weaknesses in its business and raised the capital to help weather the CRE cycle and thwart pressure on earnings from CoStar eating their lunch. Some fools (small f) disagree: http://www.fool.com/investing/small-cap/2009/03/05/loopnets-lunch-is-safe-for-now.aspx However, CoStar just released a new individual subscription option that appears to go directly after LoopNet's market share. http://showcase.costar.com/Ecommerce/public/login.aspx

LoopNet's management team realizes that in retrospect it was stupid to buy back $55 million in stock at around $10-12 a share, so they decided to dilute shareholders through this expensive deal. Existing insiders (with board seats) Trinity Ventures and Rustic Canyon Partners benefited from a deal that did not require shareholder approval. Calera Capital, not a previous shareholder, also participated in the deal. Other shareholders were diluted.

Don't be a fool. LoopNet is a loser and doesn't have a good plan to accelerate their growth strategy.

No debt plus #1 in its field

Loopnet is toast IMO. In a declining market they have increased their premium fees exorbitantly over the past two years. I and a lot of folks are canceling our premium memberships. $3,000+/yr is too much for a lot of professionals to bear at this point for what is essentially a basic, no frills listing service. NAR has their own model coming out. Catylist does a very good job as well, giving comps, using Google StreetView, etc.

I just cannot see this company sustaining itself in this competitive environment with these fees.

They can do it, yes they can!

LoopNet is most likely stop #1 for anyone interested in buying commercial property or looking to buy a small business. I have been interested in both, but never found what I was looking for. With my hours of first hand experience with the web site I can say easily it's the best. LoopNet also has that nifty 'everyone's doing it and everyone's doing it here so I'm going to do it here too' social inertia that brings much added value. I just hope it doesn't end up like Friendster (remember them?). In the end I think LoopNet has the right product, no debt, great earnings potential as markets turn, and a cheap valuation.

Sold!

Tons of property for rent and buy sitting in inventory needs to be sold somehow.

great long term play

Two part play in an industry that may be ripe for competition.
Short CSGP and Long LOOP on valuation measures.

gut

Large moat.

Recovery starts next year. This one should bounce back quickly.