Thursday, April 12, 2007

Calls of Note Part 2

Thomas Weisel says their checks point to subdued 1Q subscriber growth for LoopNet (NASDAQ:LOOP). Their analysis of for-sale listings and site traffic suggests that count should be up from last year, but at a decelerating pace with net adds likely to be below the prior year's level for the third straight quarter.

Concern over subscriber growth could weigh on the stock in the short term, but firm still sees a big opportunity for LOOP to shift the pricing model over time and maintain an Overweight rating as a result with an upbeat view of long-term growth potential.

Firm has two new data points: (1) for-sale listings rose by 6,000 in 1Q to 199,000 (4Q rose by 12,000) and (2) average monthly site visits rose 11% sequentially to 1.0mn in 1Q. Firm has no direct read on subscriber growth, but can look at the past correlation of both metrics to subscriber count to get a sense of direction.

LOOP has run at 2.45-2.50 listings per subscriber and a similar ratio in 1Q would point to 1,600-5,000 net adds. Visits converted at a 0.16% rate in the 2Q-4Q period (0.1% 4Q). Using 1Q traffic and a 0.10-0.15% conversion rate, net adds would be 3,100-4,600. Thomas Weisel's estimate for net adds is 4500.

Notablecalls: With the stock sitting near the highs, comments about subscriber growth below expectations are not going to help the stock. Expect to see pressure on the shares over the next few days.

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