Real estate website Trulia had plenty to celebrate on the
one-year anniversary of its initial public offering, with its
shares surging more than 180% since their trading debut and the
company posting its first profitable quarter.
Whether its next anniversary will be as upbeat may depend
largely on whether looming interest rate hikes curb
) website, Trulia.com, provides online tools that offer
homebuyers, sellers, owners and renters information on properties
and real estate professionals.
The site helps buyers find prospective homes by enabling them
to narrow their search to meet their needs, including location,
the number of bedrooms and price.
Real estate agents buy subscriptions to help them offer their
services directly to buyers and sellers.
Housing demand has recovered slowly from a stunning downturn
as economic growth, lower unemployment and rising home prices
have helped restore confidence.
By The Numbers
Trulia's financial results reflect that demand. Since its
stock debuted on the NYSE on Sept. 21, 2012, it has produced
three full quarters of 75% or better sales growth.
The company posted its first quarterly profit on July 31,
surpassing analysts' forecasts. Paid subscribers climbed 49% from
the prior year to 32,123. The average monthly revenue per
subscriber climbed 31% to $194.
Those kinds of numbers have brought favorable reviews from
"Trulia's strong traffic growth and record subscriber net adds
in the first half of 2013 have been impressive, especially
considering the company does not allocate any marketing dollars
to branding," JPMorgan analyst Doug Anmuth noted in an August
Trulia recently boosted its subscriptions by adding a net
18,000 subscribers to its existing 32,000 with its buyout of
Market Leader, a provider of real estate SaaS (online software as
a service) customer relationship management tools. That deal,
estimated at $355 million, was announced in May and closed in
"While the size of the deal represents some risk, we believe
Trulia can ultimately leverage Market Leader's large user base
with cross-selling opportunities," Anmuth noted.
Meanwhile, Trulia's share price has shot much higher since
debuting a year ago at 22.10, after the IPO priced at $17. The
stock touched a record high of 52.71 on Thursday and currently
trades near 48.
That stock growth extends to Trulia's chief rivals in online
real estate tools:Zillow (
) andMove (
Zillow, based in Seattle, provides tools for buyers, renters
and agents. Its stock price has more than doubled over the past
San Jose, Calif.-based Move, which specializes in rentals, has
seen its shares rise more than 85% over the same time frame.
Each of these companies has benefited from this year's rebound
in the housing market.
Signs Of Strength
Last week, the National Association of Realtors reported that
existing-home sales in August rose to a seasonally adjusted
annual rate of 5.48 million from 5.39 million in July.
Sales were up 13.2% from a year earlier and reached the
highest level in more than six years.
Foreclosed or short-sale homes accounted for only 12% of
sales, down from 23% the prior year. The median price of a
single-family home gained 14% to $212,000.
Though much of the news has been positive this year, concerns
are growing that rising mortgage rates will slow the rebound. The
average rate for a 30-year fixed-rate mortgage has increased to
4.5% from about 3.3% as recently as May.
In a statement accompanying the existing home sales report,
NAR Chief Economist Lawrence Yun warned that the housing market
might be experiencing a temporary peak in sales.
"Rising mortgage interest rates pushed more buyers to close
deals, but monthly sales are likely to be uneven in the months
ahead from several market frictions," Yun said.
Still, many industry analysts remain upbeat about the state of
the housing market. And the Federal Reserve Open Market
Committee's decision last Wednesday to keep up the pace of asset
purchases could help keep a lid on mortgage rate rises,
as IBD reported
Fed Chairman Ben Bernanke said then that the Fed is "somewhat
concerned" and wants to "see the effects of higher interest rates
on the economy, particularly in mortgage rates on housing,"
before any potential decision to taper stimulus.
Jed Kolko, Trulia's chief economist and VP of analytics, says
that even though rising rates "may hurt sales a little," an
improving economy and expanding housing inventory will help
"In addition to rising rates, we also happen to have more
inventory," Kolko told IBD. "The reason for the slight increase
in inventory is that rising prices have encouraged more people to
put their homes on the market. Inventory is still tight but it's
not quite as tight as six months ago."
For now, the outlook on Trulia is positive. Analysts expect
the company to produce robust earnings growth over the next year
and a half as it expands its user base and real estate agent
subscriptions and integrates its purchase of Market Leader.
The company also stands to benefit from growth in its Trulia
Local Ads (TLA) program, which lets real estate professionals buy
a percentage share of advertising space on Trulia's search
results and listings pages.
Trulia should get a similar boost from its Trulia Mobile Ads
(TMA) program, which lets agents meet clients who use Trulia on
their mobile devices.
JPMorgan's Anmuth expects "TLA pricing increases and strong
TMA adoption" to drive average revenue per user growth. He also
says the Market Leader buyout "helps to enhance Trulia's offering
to real estate agents and expand its marketplace product