Homestore Inc.’s shares took off Friday, gaining almost 40 percent following a positive earnings announcement that surprised investors and Wall Street analysts.
The Westlake Village based online real estate company reported $3.3 million in net income (2 cents per share) for the second quarter ended June 30, compared with a net loss of $4.26 million (3 cents) for the like period a year ago period. Revenue for the second quarter was up 16 percent to $63.3 million. Homestore’s shares were up 39.4 percent, or $1.01, to close at $3.57 for the day.
Analysts were expecting a loss of 2 cents per share, according to Thomson First Call.
The announcement marked the first time the online real estate company has reported positive earnings since it had to restate it earnings in 2001, prompting a Securities and Exchange Commission investigation and federal lawsuit charging insider trading, falsifying books and violation of securities laws.
The company settled the case in 2003, agreeing to pay $13 million to shareholders and 20 percent of its outstanding shares. In March, former Homestore Chief Executive Stuart Wolff and former Vice President Peter Tafeen were indicted for 19 criminal counts in April. Nine other former executives pleaded guilty to criminal charges.
The company has restructured, brought in new management and branched out into software for real estate developers, called Top Producer, and the Internet sites Realtor.com and HomeBuilder.com. Management credited the new properties with driving growth for the quarter. Almost $7 million of the increase came from the company’s media services business, while about $2 million came from its software business.
Deutsche Bank analyst Jeetil Patel upgraded the stock to “buy” from “hold” on Friday on the news.