I agree with Zacks and so does Loops mgmt over the next 1-2 yrs. There are definite headwinds. Watch the commercial REITs for deterioration for signs that the residential problems are spreading to commercial. In the longer term, Loop's prospects are very positive: -They are cash flow positive (even in this tough market). -They have a very strong balance sheet. -Their return on assets is 15%+. Compare that to internet boom companies who were burning through cash. Imagine the boost to EPS that just avg leverage would add once things settle down a little. -They are growing revenue faster than Costar -They have 600K listings that they have not even begun to monetize (Costar was excited because they had a client with 1,000 potential listings looking at their listing program) -So far they have very little monetization of their advertising potential. Compare that to the ad revenues someone like Bankrate is able to get. -They have a model that allows them to build market share very quickly, hence the panic by Costar. What will Costars expensive database be worth once Loop controls the listings market? -Despite the Real Estate downturn, the listings market is going to continue to move on-line long term. This is a huge market and hopefully Costar and Loopnet will stop trying to kill the other and decide there is room for both to win in this migration. Costar has the most to lose, but also appears to have a win/lose personality. On the short term, you have to pay attention to the short interest. At these levels, it is in control on the way up and down. I am a little disappointed that Loop used up so much of their powder already on the buyback. This is also bearish in that it shows there were very few buyers since the last earnings 2/5. I also am concerned about the rising costs of stock compensation. This is starting to escalate to high levels. As for the shorts, I continue to think that sooner or later, they have to find a way out. If the market takes off, I would think the shorts would want out. If the market starts heading to the downside, I would think that Loop would show relative strength due to the low level they are at already. Either way, shorts need to find a way out unless the Commercial RE mkt crashes. Bottom line, I am willing to invest $11-12 for $2.30 in cash and for .50 earnings for next 1-2 years and large upsides if: -short squeeze -someone trys to buy (longshot) -Costar and Loop call a truce (long, long, longshot) -Loop continues to execute their plan and in 10 years owns the commercial listing AND information market. Then we will have to worry about anti trust issues. For now, I am holding and adding on dips and watching volume daily for signs of a short squeeze.
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