Well, I hate to be the one to say I told you so, but, I told you so. Back on December 11th I said it was time to take a swing on LiveDeal Inc. (NASDAQ:LIVE). The company was causing quite a stir within the investment community, and shares of LIVE were getting more and more bullish traction. All told, LiveDeal shares are up 119% since the look I took less than a month ago, coming out of nowhere, and surprising a lot of people.
Be that as it may, while the big rally from LIVE (it's up 40% today alone) is deserved and still doesn't fully reflect the company's potential, I can't deny that LiveDeal Inc. shares are overextended and ripe for a pullback. If you happened to be one of the few that waded into the stock when I made my first mention of it in early December, today's strength is a prime profit-taking opportunity. Just don't sit on the sidelines too long, because the odds are good that there's still a ton of bullish interest in LIVE just waiting in the wings.
First things first. The chart of LiveDeal Inc. below doesn't leave much to debate. It's been building up a rally for several days, and it's gone absolutely nuts the last three days. This rally was certainly a lot of fun for current holders, but there's no way of denying that the stock's more than feeling the weight of its own gain. In fact, the weight of the gain is apt to be greater than the force behind its current rally by this time. Translation: A pullback is in the making. If you haven't yet, I suggest locking on whatever gain you have on LIVE (from my initial suggestion) here while you can.
With that being said, don't take LIVE off your watchlist. See, while it may have been the right combination of news, euphoria, and hype that pushed the stock into an overbought situation, the news itself is meaningful, real, and says the company should have more value than its current market cap would imply.
As a refresher, when we last looked at LiveDeal Inc. we described it as a restaurant daily deals/coupon company in the same vein as Groupon (NASDAQ:GRPN) or LivingSocial, but with one key difference.... LiveDeal works for the consumer, and the restaurant, and the company. The platform allows restaurants to post coupons and offers "on the fly", on their terms, for as long or as short of a period as they wish. Some offers are only available for a matter of hours, which gives restaurateurs the flexibility and control that they just didn't have with Groupon. Indeed, Groupon's deals were so bad for some businesses that they ultimately bankrupted some of the smaller companies that tried to use them. LIVE offers something that fosters longevity.
At the time of our last look, LiveDeal had already proven the premise in San Diego, and was just then venturing into the Los Angeles market. The response has been stunning. Per this morning's press release, about 1000 Los Angeles restaurants have signed up to offer coupons via the LiveDeal platform. That's about 20% of the market... a huge success. If there was any doubt about the viability of the idea, it was wiped away with that announcement. That's why the stock's soaring.
While overbought and due for a dip, don't steer clear too long. Even with the triple-digit advance on less than a month, the company's market cap is still only $29.6 million, and the company's got another 25 or so major metropolitan areas in the United States - cities with a population of more than 2 million - that would be receptive to the LiveDeal platform. That's a massive amount of opportunity, and the company's proven way to penetrate new markets means big growth is a foregone conclusion.
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