Local.com Gives Ammo For True-Believers & Critics Alike (LOCM)

Local.com (NASDAQ:LOCM) has posted its quarterly results.  The "local-oriented" micro-cap Internet stock posted revenue of $5.6 million (mid-range of guidance); 38% growth yr/yr and 10% sequential growth; local search revenue grew to $5.0 million. Diluted net loss after a $50.54 charge was -$0.71.

It also issued guidance: The company expects fourth quarter 2007 revenue of between $5.7 million and $5.9 million and the mid-range of local search revenue to be approximately $5.4 million, an increase of 8% over the third quarter 2007. The company expects net loss for the fourth quarter 2007 to be between $2.4 million and $2.6 million, or $0.17-$0.18 per share, which includes non-cash expenses of $0.9 million or $0.06 per share. The loss per share forecast assumes 14.2 million weighted average shares outstanding.

If you trust estimates from analysts on a micro-cap Internet stock, First Call noted -$0.57 EPS and $5.65 million revenues, supposedly with -$0.13 EPS and $6.3 million in revenues for next quarter.

This was one of our "Small Cap Internet Watch List" stocks that we feel was one of several that could end up becoming a takeover candidate under the right circumstances by a larger Internet or larger media and technology companies. 

As we noted to subscribers, none of those companies are to be considered imminent.  Any such deals would almost in every case be deemed very friendly to the top management at each as well, particularly since the companies that fit into these lists can adopt anti-takeover measures if they choose.  Local.com just last week announced that its Bylaws were amended and restated to allow for the issuance of uncertificated securities……

Other metrics Local.com disclosed: Revenue per thousand visitors (RKV) was $168, up 95% from $86 in the third quarter of 2006 and up 10% from $153 RKV in the second quarter of 2007. All outstanding convertible notes were converted into 2.0 million shares of common stock in July. The company currently has no debt. In July it began selling subscription ad products directly to local businesses. On September 30, 2007, the Company had $18.1 million in cash and marketable securities and no debt.

Shares appear to be up slightly in after-hours trading.  Frankly, 24/7 Wall St. would have liked to have seen more.  But the good news here is that many traders in this cult stock are possibly going to try to treat any stability or any growth as a win.

Shares closed down over 1% at $5.08 in normal trading today.  Shares were up marginally after the report, but shares have come back in since the initial reaction.

Jon C. Ogg
November 5, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.