Homestore.com Soars on Cash-Flow Forecast
Homestore.com says its about to join an elite club: Internet companies that actually generate cash rather than burn through it.
Shares of the Thousand Oaks company (ticker symbol: HOMS), which operates a family of Web sites with a variety of home-related information, products and services, soared $7.75, or 25%, Thursday to $38.50 on Nasdaq after announcing a day earlier that it would achieve “cash profitability” in the fourth quarter of this year.
Cash profitability is an accounting term signifying that the company is bringing in more money than it is spending. Still, it varies from the gold standard of profitability, or “net income,” which is what’s left after a company subtracts out noncash items, such as the value of stock issued to employees or accounting charges related to mergers.
Even so, “This is very significant,” said James Fowler, analyst at Thomas Weisel Partners in San Francisco. “This means that two months from now rather than burning up cash like so many Internet companies they will be generating cash. This is nothing short of a complete validation of their business plan.”
Homestore.com’s strategy is to become a one-stop shopping portal for all things real estate. Consumers can use its Web portal to reach home builders, contractors, architects, real estate lenders and even rent moving trucks.
About half of the company’s revenue comes from subscription dues paid to Homestore.com to host the Web pages of real estate agents. Homestore.com so dominates the business that the Justice Department opened a probe in April seeking whether the company engaged in anti-competitive practices in gaining exclusive contracts from the nation’s largest residential property listing services.
