Tuesday, February 14, 2006

Knot Too Shabby

Wedding info and product provider The Knot (KNOT) delivered some really smoking numbers last week:
...the company saw a 27% gain in net sales after booking $12.8 million. Operating income ballooned over 850% to $1.3 million. Net income went up 700% to $1.5 million ($0.06 per diluted share) compared to $185,000 ($0.01 per diluted share) a year ago.

...we see that The Knot is not without its legal issues. The online concern has been at odds with another nuptials-related entity, WeddingChannel.com. The litigation process has added significant expenses to the company's operations.

Take a look at gross margins: In 2005, they went up to 78% from the previous year's 73%. National and local online advertising initiatives saw a very healthy 47% growth rate, while the publishing segment brought in a 21% gain. However, the 4% drop in merchandising revenue for the quarter is a little concerning.
We can't argue with numbers, but we can add that KNOT has already had a huge run-up in the last couple of quarters.

The e-tail category is dangerously fragile, and this company's competitive advantage is weaker than analysts think.

We see the Knot possibly getting acquired if it can sustain this level of revenue visibility.

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