Wednesday, December 2, 2009

(LOOP) Upcoming Problems

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Loopnet (LOOP)

Current price: 10.70

What the company does

LoopNet is a leading online marketplace of commercial real estate in the United States. The company's subscribers use its Web site primarily to list or search for commercial real estate properties. At the end of 2008, LoopNet had 77,000 premium subscribers, and its Web site contained 652,000 property listings. LoopNet also operates BizBuySell, a Web site that lists for-sale companies


During December, 2nds trading day LOOP hit its 52 week high, a fact that concerns me. I evaluated LOOP when the stock price was trading around 8.28 and determined from my analysis it was overpriced and the company face a bleak future outlook.

Since this analysis most of my predicted factors have either come to play or have become more of a reality.


1)Loopnet would lose more subscriptions and have a year over year decline in revenue and earnings for their 3rd quarter.

Loopnet reported reveune of $18.8 million compared to $22.4 million. EPS was $0.9 per share vs. $0.13

Loopnet had a 17% decline in premium subscription customers. On a positive note the company also reported a 21% increase in customers but this did not offset the huge blow from the loss of premium costumers.

2)Loopnet will face tough economic conditions well through 2010 which will continue to drive down their customer base. The commercial real estate market has also come under watch by many economists fearing a crisis. The theory is the commercial market lags behind the residential and the commercial has yet to experience the same deflation as the residential.

3)Heading into 2010 with predictions of strong economic growth and turn around; the commercial real estate online marketplace faces little to no barriers to entry. Any small real estate firm can list their own properties on line or start their own business. This factor of little barriers to entry will diminish any above average returns an investor may anticipate from Loop. This would offset the investment rationale that commercial real estate is becoming more popular online and Loopnet will benefit from it because there will be an increase in competition and firms seeking an economic profit which will draw down returns.

Loopnet is losing premium subscriptions and having to little growth in customers to offset this decline, as well as the risk of a commercial real estate crisis and continued sales decline Loopnet faces many challenges. Because of these challenges an investment in LOOP has many risks that must be considered before making a decision. I personally feel there are better options out there that have less risk and a more optimistic future than LOOP.

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