LoopNet, Inc. (NASDAQ:LOOP)

Hidden Gem

Number one website in the commercial real estate industry. Potential buyout target with all the consolidation going on in the internet dot com space. Partnerships with all the big companies in the industry.
- Good fundamentals

Real estate marker is down--internet broadens the search and helps commercial real estate as well as individuals looking for just the right property. Internet market small now--beginning to grow.

This is a good example of more and more new businesses using the internet as the basis of their business plan.

Currently trading at 65% intrinsic value.

I'm a commercial real estate broker. The brokers in my area central FL are turning away from loopnet. They marketed their listings on loopnet and sold it as a plus to their clients. The clients then started putting their listings on loopnet

themselves. loopnet by taking principal listings has placed themselves in direct competition with the Realtors. Realtors are now not telling their clients about loopnet and moving onto

other listing services who value their bussiness

as they are now the competition.

real estate agents are too pricey, businesses will recognize this cheap alternative

I use Loopnet and I can tell you that they are on the ball and rockin! They will go far.

leader and potential takeover target, no debt, insider ownership, this one will go up!

internet buying of commercial realestate is here to stay

hmmm, a Hidden Gem twice in a row. Pegged as the match.com of the commercial real estate market. Don't see the commercial real estate market taking a hit like the housing market, but even in a harsh housing or real estate market people will need to shop/buy/sell it is an investing win either way.

valuation and leveraged business

They pretty much have this industry for themselves thusfar.

I want to recap some of the fundies of this company since it is a recent HG recommendation and I recently added 70 shares at 16 dollars myself.

Pros - Their historical P/E is around 40, which is not much higher than the industry average. If growth prospects remain solid this number should not drop for awhile. It might even rise. I think with recent exposure this company will continue with positive earning suprises. I estimate a high of .54 cents for 07 and .72 cents for 08. That would push the stock price up about 30 % for one year out and an additional 38% for 08. This aggressive target would have the stock price around 29$ around the end of 08.

Management and Operational efficiency has improved for 3 years in a row. All expenses have continued to decrease as a percentage of revenues.

While a NOL gave them a nice carryforward tax benifit in 05, 06 showed a 51% decrease in earnings. This is a fabricated number that can mislead the general amateur investor. Income Before Taxes actually increased 105% yoy for 2006. Their operating margin came in around 43%, the industry average is 10%.

Loopnet is not selling at a very valued position, but it is not at a premium either. The PEG is right about 1.02 and I think their earnings will beat estimates, essentially making the true PEG even lower. They have 0 Long term debt on their books so surviving cyclical environments and bear markets should be ok. Also, 92% of their listed Assets are liquid.

Insider ownership is 40%.

Cons - I am not impressed by the enthusiasm of what seems to be a conservative management team. Their proceeds from recent stock issuance has been invested in short term securites with no current plan on how the money will be used. While I like seeing no debt, a company that has a chance to exploit a niche should be using available capital to gain market share and raise the barriers to entry. Especially for a .com business. Why not leverage the proceeds to expand their business and future earning potential.

Overall I think this stock will earn a conservative estimate of 15 to 20% growth a year for a couple years. Aggressively, and very possibly those numbers could be what I discussed in the beginning of this post.

I feel like a company like this can explode exponentially when it gets a certain level of exposure. Average risk and above average return, with potential to be a very solid market beater.

The internet is so efficient for bringing buyers and sellers together. LoopNet looks like it has already built a substantial network of buyers and sellers.

I am not in the real estate business, but I joined Loopnet and enjoyed the site very much. So much so, I invested in the company.

Superior commercial real estate website with new customers joining everyday.

A online meeting place for buyeers and sellers of commercial property accross the United states. Makes investing easier, and all LOOP has to do is maintain a good web site and get people to use it. Which they will, because it makes there life easier. Comparable to what realtors do with there Multiple listing service. PE ratio is high, but the company is just starting, and profits should improve substantially in the next couple of years.

Just a gut feeling.