Needham & Company Boosts PT on Trulia (TRLA) Following Management Meetings

Needham & Company raised its price target on Buy-rated Trulia (NYSE: TRLA) from $32 to $40 following investor meetings with Trulia’s CEO, Pete Flint, and CFO, Sean Aggarwal.

"We highlight management's confident tone, particularly related to Trulia's competitive position, growth opportunities, revenue growth, and margin expansion," analyst Kerry Rice notes.

Rice highlighted several of the most important points:

We believe strong new home starts should not only translate into strong Media demand for Trulia, but should also increase agents' willingness to spend more on marketing. New home starts increased 47% in March, reaching their highest level since 2008. We note that 1Q13 housing starts increased 36% YoY, accelerating from 34% in 4Q12. We believe this acceleration should support our estimated 1Q13 acceleration in Media revenue growth. We also believe the strong housing starts should translate into additional marketing spend by agents, who are now selling more homes in the improving housing environment.

We expect significant margin expansion over the next couple of years. We believe significant leverage exists in Trulia’s model, which is reflected in our 2013 and 2014 EBITDA margin estimates of 11% and 18%, respectively. We believe our 18% EBITDA margin could prove conservative given the company’s pricing leverage, revenue mix shift towards mobile, new product launches, and strong overall revenue growth. Trulia expects long-term EBITDA margin of 45-50%. Importantly, traffic to Trulia is organic, enabling the company to focus on developing innovative products to drive life-time value per user while keeping customer acquisition costs low.

Expecting Trulia to execute on M&A strategy. We expect Trulia to utilize its ~$210 million in cash and appreciating share price to execute its M&A strategy. We would expect the target to be strategic, instead of financial, have proven scale, and provide significant synergies. We believe targets with market cap of $100-400 million are possibilities.

For an analyst ratings summary and ratings history on Trulia click here. For more ratings news on Trulia click here.

Shares of Trulia closed at $33.11 yesterday.

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