Trulia: Home Buying Goes Online

07/26/2013 8:00 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Trulia is one of several upstart online real estate Web sites that have grown up since the housing market went bust, observes Mike Cintolo of Cabot Top Ten Trader.

Taking advantage of the growing online trend, Trulia (TRLA) connects home buyers with real estate agents via the company's marketplace Web sites. And business is booming.

Marketplace revenue, which consists of premium subscriptions for real estate agents, made up 70% of Trulia's total revenue in the first quarter. What's more, this revenue source was up 100% year-over-year in the most recent quarter.

What's in it for the agents? They can get on the site for free, establish a profile and contribute content, but paying for a premium subscription allows them to promote their listings in Trulia's search results and target mobile users—resulting in higher-quality leads.

The balance of Trulia's revenue comes from advertising, which is driven by traffic. During the first quarter, ad sales rose 91%, as users ballooned 51% to 31.4 million unique monthly users.

Trulia's biggest difference, versus competitors like Zillow and Redfin, is likely its user-generated content.

The company currently has the largest database of real estate-related, user-generated content in the business, which helps its Web site generate higher traffic and generally attracts more buy-ready customers.

Whatever the reason, Trulia is growing rapidly, and while the company is still small compared to traditional real estate players, it has big potential. Earnings are out July 31.

Technically, TRLA went public right when the market was peaking in September last year, and then plunged from $26 to $15. Following a short basing period, TRLA rocketed to an all-time high of $38 before retreating sharply to support at its 50-day moving average.

TRLA looked to breakout following its Q1 earnings report in May, but the strength was short lived, and the stock spent the next several weeks grinding sideways.

The situation changed once again at the beginning of July, with TRLA reclaiming its 50-day trendline and soaring past former resistance near $35.

The shares are now taking a breather, consolidating above $35 and their 10-day moving average is a bit overextended, so buy on dips.

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