LoopNet: Expecting Strong Earnings, but Bleak Outlook for Real Estate

LoopNet is scheduled to report third quarter 2008 results after the market closes on Thursday, October 30. Based on our analysis, we at eChristianInvesting are expecting LOOP to report better than expected results that beat Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $21.8 million and EPS of $.14. This would represent a 17% increase in revenues from last year’s $18.6 million in the same period. The current analyst consensus calls for revenues of $21.9 million and $.12 EPS.

On July 30, the company gave 3^rd quarter guidance for revenue of $21.8 – 22.0 million and EPS of $.14 – .15. Our checks showed good traffic growth in the third quarter for the LoopNet.com website. Management has done a superb job of guiding this company despite the current economic challenges. Since going public in the summer of 2006, the company has managed to beat analyst estimates each quarter and we believe that will be the case yet again this quarter.

Share Performance

To date, LoopNet’s shares have dropped over 51%. Meanwhile, the NASDAQ has only fallen 41%. This poor share performance is primarily a result of the markets disfavor of all real estate related stocks despite the fact that LOOP focuses on the much more stable commercial real estate sector.

Valuation

Shares are now trading at 11x consensus 2009 EPS estimates. This is essentially inline with their peer group. Despite the potential for better than expected quarterly results, with the continued bleak outlook for the real estate sector we would not recommend holding LOOP shares in the current market.

However, once consumer sentiment starts to improve, we believe that LoopNet will benefit from their leadership position in the online commercial real estate space.

Recommendation: Hold with a $7 price target.

Disclosure: none