Homestore and Countrywide Financial Corp. were the top winners on Wall Street last month among the 10 publicly traded corporations that comprise the hypothetical Inman News index of real estate brokerage, mortgage and technology stocks.
The index overall performed better than breakeven in November with a gain of 1.15 percent; however, that result lagged the Dow Jones Industrials, Standard and Poor’s 500 and Nasdaq Composite indices, which gained 3.54 percent, 3.57 percent and 5.83 percent, respectively, during the month.
Homestore’s stock price increased from $3.68 at the beginning of the month to $4.41 at the end of the month, a gain of 73 cents, or nearly 20 percent. The company announced a trifecta of positive news: a newly extended two-year exclusive content distribution deal with America Online, the sale of $100 million in preferred stock to Elevation Partners, a private equity investment group, and third-quarter financial results in the black at 1 cent per share. The profitable quarter prompted a columnist for The Motley Fool at Fool.com to declare: “It’s official: Homestore.com is no longer a desperate fixer-upper.”
Meanwhile, Countrywide’s shares rebounded nearly 10 percent in November after hitting a 52-week low the prior month. The company’s per-share price increased from $31.65 to $34.81, a one-month gain of $3.16. Part of that gain followed an announcement of four new branch financial centers in the fast-growing Phoenix area. The new locations are in Scottsdale, Gilbert, Sun City and Phoenix itself.
Other companies in the home mortgage sector were also on the upswing in November. Washington Mutual and IndyMac Bank netted gains of 3.8 percent and 3.6 percent, respectively, while Freddie Mac and Fannie Mae posted gains of 1.79 percent and 1.12 percent, respectively.
Two Inman Index companies in the online real estate brokerage and lead-generation businesses were hard hit by investors. ZipRealty’s shares lost more than 33 percent, or $4.37 per share, in November as the price decreased from $12.93 to $8.56, a month-end close that was still above the 52-week low of $7.75. HouseValues investors lost almost $2 per share as the stock price declined from $14.76 to $12.78, a one-month drop of more than 13 percent.
ZipRealty reported a remarkable 61 percent increase in year-over-year quarterly net income from $1.3 million in the third quarter of 2004 to $2.9 million, or 11 cents per share, in the third quarter of 2005. Yet news reports suggested Wall Street was dismayed that the company’s results were shy of earlier forecasts of per-share third-quarter earnings in the 12 cents-to-14 cents range.
The news prompted Deutsche Bank to downgrade its outlook on Zip from “buy” to “hold” while Pacific Growth Equities cut its opinion from “buy” to “neutral” and said in a report that the company’s “near-term growth and margins are expected to be adversely impacted by macroeconomic challenges.”
HouseValues’ shares also declined despite an impressive increase in net income from $1.6 million, or 7 cents per share, in the third quarter of 2004 to $4.3 million, or 16 cents per share, in the third quarter of 2005. Banc of America Securities reiterated its “buy” rating on HouseValues on the news and raised its target price on the company’s shares from $18 to $20.
HouseValues also announced that it would acquire The Loan Page, a San Francisco-based marketing and lead generation company for the mortgage industry, and that it would add a personally branded Web site at no additional cost for its HouseValues.com and JustListed.com subscribers.
Marcie Geffner is a real estate reporter in Los Angeles.
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