Move Inc. (NDAQ:MOVE) is owner of Move.com and a series of other web portals designed to connecting real estate buyers and sellers, including Realtor.com - the official NAR (National Association of Realtors) portal. The stock, which was up to around $7 per share earlier in the year, is now on the rise again. So, is it a good time to buy? Let's take a look...
When looking at the macro picture surrounding the company, it is not difficult to see that there is trouble in the housing market. Rising interest rates make it more expensive to own a house because of the higher financing costs. More expensive loans end up pricing people out of the market, which reduces housing demand. The reduction in demand causes the price of houses to decrease, which is what we are currently seeing in many housing markets. The reduction in both demand and price are not good for realtors, as they must face both reduced demand for housing and a reduced commission (due to lower selling price). These two factors may decrease the deal flow seen at web portals like Move.com.
Since they operate an Internet portal as their primary business, we can partially qualify this thesis using Amazon's Alexa.
This Alexa report shows the downward trend of traffic going to their main portal, Move.com. This reduction from a high of around 15 - 18 million visitors per day down to 8 - 10 million visitors per day is quite significant, and is likely at least partially attributable to the economic environment (since sales and marketing expenses were up during the same period).
There are also problems with the company itself - most notably, the fact that they don't make money (on a GAAP basis). According to their own
10K filing with the SEC:
"We have incurred net losses every year since 1993, except for modest net income in 2005, including net losses of $7.9 million and $47.1 million, for the years ended December 31, 2004 and 2003, respectively. As of June 30, 2006, we have incurred a modest net loss and have an accumulated deficit of approximately $2.0 billion ... certain business model changes that will require considerable
investment with no assurances that our future financial performance will be enhanced by these new initiatives."
The most troubling issue is the fact that during the United States' largest real estate boom, the company was not only unable to turn a profit, but actually accumulated a $2 billion deficit! And now after the boom is (arguably) over, the company still retains an enterprise value (EV) of over $640 million. Even if the company is a clear market leader with an increasing share of the online real estate listings market (which is debatable), the company still faces both macro-economic and internal issues that it needs to resolve before becoming profitable. The company could also face antitrust issues relating to their exclusive relationship with NAR, assuming that the online real estate listings market continues to grow as fast as it is (expected to double by 2010). Finally, the company is in the process of changing its web portals, and the success of this depends largely on how well customers accept these new online destinations. Overall, it would be best to hold off on any investment in MOVE until the company achieves profitability and is able to demonstrate that it can drive traffic to its new portals.
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