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Trulia (TRLA): Truly A Site To Behold

 November 05, 2012 03:53 PM

Trulia, Inc. (NYSE: TRLA) should benefit from rapid top-line growth should be driven by highly complementary existing and proposed revenue lines that make use of the same audience while also enhancing the value to the user.

San Francisco-based Trulia is an online real estate marketplace with more than 23 million unique monthly visitors, 22 thousand paying subscriber agents, and 360 thousand total agents with an active profile.

With a fundamental change in how consumers conduct research in the home buying process, online real estate has become a fast growing space with three primary players, of which Trulia is one.

[Related -Zillow Inc. (Z) Q2 Earnings Preview: Data Suggest Bullish Revenue Surprise]

"The existing unit economics in the business point to an opportunity for expansion and further revenue growth. The company is in the early stages of penetrating a large total addressable market that is shifting online, with the opportunity to serve unmet needs of both agents and users," RBC Capital Markets analyst Andre Sequin wrote in a note to clients.

Trulia, which competes with Zillow and Realtor.com, offers a premium set of tools to both customers and agents, with leading search technology, a variety of features, and award winning apps. Trulia is also the only company to offer an app targeted directly to agents.

"Our proprietary survey indicates that while users were least familiar with Trulia of the three, the company scored well in comparison for its breadth of information, user-generated reviews, and mobile apps," Sequin said.

[Related -Trulia Inc (TRLA) Q3 Earnings Preview: A Tough Sell]

Despite the strength of its product, Trulia currently monetizes its subscribers at a significantly lower rate than its primary competitor Zillow. In addition, the rapid improvement in this metric and upside potential indicates that the company could succeed even without capturing a larger share of the market.

comScore data shows that Trulia also has a significant portion of its audience, which is independent of the other primary players in the space. It means advertisers can reach an incremental set of customers by advertising on Trulia.

"We would expect this separation of audiences to continue as users have a tendency to choose one site to stick with through the home buying process," the analyst said.

Trulia's average revenue per user (ARPU) is also significantly higher in high-demand ZIP codes than in those that are under-penetrated, and more markets should develop into high-demand areas as the company gains agent subscribers, driving up average ARPU.

Finally, Trulia has found success in monetizing mobile where many other Internet companies have struggled: mobile ARPU is already above with desktop rates, despite a significantly smaller audience. EBITDA margins are projected to expand significantly after turning positive in 2013.

"We believe TRLA deserves a premium to our Internet coverage peer universe as the company faces a growth opportunity which stands out even in a high growth industry," Sequin added.



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