Why Local.com Deserves a Place in the Spotlight

Seeking Alpha was a pioneer in putting the small internet media firm Local.com (LOCM) in the spotlight. However, due to the sub 100M market cap, not many major media sources want to talk about the story. To be fair, Barron's, Motley Fool, The Street, Bloomberg and Forbes did pick up small blogs/articles when the stock ran up from about 4-14 dollars in July, but I still think the company is not getting the proper respect they deserve.

Local has year over year revenue growth of just over 50%, $20M in cash, and no debt. This is the strongest financial position they have been at since 2004, and the stock was in the mid 20s, and even up over 31 briefly, three years before the debt changes and patent awards.

Yes, it is true that the stock has suffered recently; short sellers jumped on it when management diluted shares to clean the balance sheet, but with the future growth expectations and the fact that CEO Heath Clarke did not sell one share when LOCM stock ran from about 4 to 14 dollars, shows confidence that the stock is going much higher, either by organic growth, which will drive the multiple to the proper valuation or most likely a big player like Google (GOOG) or Yahoo (YHOO) will simply buy them out, to use the patent against the other for competitive purposes.

I believe Local.com is going to to like Hansen's - 24,000% plus returns if the stock goes forward on its own, which is why the big player can take them out for 150-800M and it will be cheap. The most ironic situation would be if Baidu (BIDU) bought them to compete against Google in the US market and used IP as their main attack weapon given all the famous history about the Chinese and their respect for IP rights.

As a long shareholder, yes, I am biased. You too will be when you spend time reading through the news/SEC filings and see that LOCM is only going up, just a matter of how quick and how high. Options trading was just announced a couple weeks ago, so the stock will make even more violatile move s over the next few weeks and months.

Good luck trading LOCM on the up and down; it will be fun over the next months. I do see a long trend towards 60-100 dollars within one year, but expect a buyout offer will arrive soon around 17-22. (I am not holding my breath on speculation, though; I can be patient and wait for more money.)

Disclosure: Author has a long position in LOCM

Comments

[dbd:]

I did paste this article on all over yahoo message board such as BIDU, CRDC, GOOG, YHOO, MSFT INSP....... but yahoo delete all my message ,why ????I do not know. But it seems like yhoo management do not klike that everybody knows about LOCM. That is the reason they ignore the upgrade done by analyst and raise thaitr price target.
but i like the alpha article ,and it says lot about the compnay.
thanxs.

2007 Sep 09 02:49 PM

[dbd:]

I had a chance to talk to ceo HEATH in c. call and he told that they are likely to get another patent in few weeks. Also he told that licencing revenue will realized by end of year. They can be acuquired if price is right.This stock will zoom new high may be above 100 dollar in a year from now.

2007 Sep 13 07:02 AM