Homestore's (NASDAQ: HOMS) stock posted significant gains on the well-timed release of three key pieces of information that all investors want to hear - that a proposed merger is going through that will strengthen the company's customer base, that a famous analyst is considering the stock favorably, and that the site has posted the best traffic numbers ever.

First in the flood of good news for Homestore investors was the Department of Justice's announcement that it would allow the proposed merger of Homestore and Move.com. This blessing eliminates Move.com as a competitor while giving Homestore a ready-made customer base, as Homestore will be the preferred lead generation tool and other technology services to the Cendant brands, Coldwell Banker, Century 21, and ERA. It also creates the nation's largest Web-based real estate services portal.

While the DOJ said it was still looking into Homestore's exclusive agreements, and other aspects of its agreement with Cendant, it was clear to investors that the big hurdle had been cleared.

The deal is expected to close by February 20, 2001. When the merger was announced on Oct. 27 Homestore said that it would buy Move.com and some of Cendant's related assets in exchange for 26.3 million of Homestore.com common shares. At that time, says a Reuters report, the deal was worth about $761 million, but because of Homestore's escalating stock price, the deal is now valued at about $900 million.

Second, Merrill Lynch Internet analyst Henry Blodget simultaneously announced that risk-tolerant investors should consider a look at several media companies including AOL Time Warner Inc., Yahoo Inc., and Homestore.com Inc.

"Although there is still significant risk in these stocks, we actually believe the risk/reward profile is better than it has been in more than two years," Blodget said in his research note. Blodget, an early Internet bull famous for setting a $400 target for Amazon.com in 1998, buttressed his opinion with data from online media buyers and companies who believe that advertising pricing has somewhat stabilized and that the companies have renewed focus on customer satisfaction.

Last, Homestore also announced record traffic figures - more than 5,000,000 unique users to its family of Web sites during January 2001, according to data just released from Media Metrix, giving it first place for exactly two years running. That's a 53% increase in overall unique user traffic from its December 2000 performance, which is seasonally a slower month for usage. The network's unique user traffic for January 2001 was almost three times greater than its nearest competitor in the online real estate category, HomeAdvisor.

Realtor.com, Homestore's resale hub, also generated more than 225 million page views in January 2001, with average daily page views of approximately 7 million, according to Media Metrix.

Thomas Wiesel Partners analyst Jim Fowler gives another perspective on Homestore's prospects. "There are two reasons why investors are buying HOMS," says Fowler. "Short covering. There's no question small hedge funds have been looking to short this stock and chatter about it's advertising model slowing and a natural cap on subscription growth with the maximum number of useful realtors around 500,000. Move.com should give a nice shot in the subscription revenue line with the 190,000 or so that are not current iLead customers.

"Some will sign up, some won't, but short-sellers can't stomach shorting a company that has insured upside revisions to analyst estimates," he says.

"Second, the company is consistently doing two things," explains Fowler. "It has set financial model and execution expectations each quarter and then blow both away. Simply stated, this company has not missed on any point of guidance for seven quarters. Show me another company - not just an Internet company - where the same can be said."

Summarizes Fowler, "While there are obviously lots of things swirling at the ground level, from the equity investors 5,000 foot viewpoint, this company is everything investors want: large market opportunity, excellent execution, financial model improvements and high barrier to entry."

Published: February 19, 2001

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.