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Hey Joe,

A fellow Raleighian! (Raleighite?) Cool.

I never implied that I don't think there is excellent opportunity here, because I do. I'm just conservative by nature and I want proof before I commit my hard earned $$$.

Fair enough! Conservative investors should probably shy away from unprofitable companies in general, and unprofitable internet companies in particular, as I would characterize these investments (including The Knot) as "high risk." I must have misunderstood your post as I thought you were saying you wanted to see proof of high growth rates in sales, which it seems to me we have in spades. Whether we can turn this into profits remains to be seen, of course.

Most retailers sport low P/S multiples, not unusually in the 1-2 range, and often below 1 (see Staples).

Are we a retailer, however, or an e-tailer, and is there a difference? I consider The Knot to have a business model that is more akin to Amazon, say, then Abercrombie or Home Depot. Amazon has a p/s ratio over 6.

Is Amazon overvalued? Perhaps. On the other hand, there may be strong reasons why an e-tailer would have higher multiples than your average retailer. Certainly we Amazon investors think so!

Another consideration is that The Knot, in many ways, seems more similar to Yahoo than Amazon. I would say The Knot is, first and foremost, an information portal for people who are planning a wedding. I think advertising revenues will always be a part of The Knot's business model (which is unlike the retailing industry, or Amazon for that matter). What this means is that the Knot will in the future have profit margins much higher than your typical retailer. So again, is the retailing industry the proper comparison?

Every investor has to reach a comfort level with his stocks, and so I hope I didn't sound critical of your cautiousness. I can see if you are coming from the retailing sector, how The Knot looks fairly valued. If you are coming from the internet sector, however, The Knot is definitely cheap relative to everybody else. And again, it's not a multiple that is warranted in my opinion given our growth rates and our market opportunity.


p.s. Crabtree's a nice mall but the parking drives me crazy...
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