To: Tom Caruthers who wrote (85 ) 8/1/2005 4:01:40 PM From: Glenn Petersen Respond to A nice move from KNOT today. Earnings out on August 11. If Federated (is stupid and) dumps its (future) position, you may get an opportunity to add some shares below 6.Take the Plunge: It’s Time to Buy the Knot The Knot’s online-ad revenue increased 41% in 2004 and is growing even faster this year. To broaden its appeal, the company recently added sites designed to target newlyweds (thenest.com) and singles (greatboyfriends.com). It also cut a deal with Target’s gift registry—the largest in the U.S., according to NPD Houseworld—to shore up a glaring weak spot in its retail business. KNOT is currently trading at nearly 100 times its previous 12 months’ earnings. But JMP Securities’ Bill Morrison, the lone analyst who covers the Knot, expects profits to jump from 11 cents a share this year to 31 cents in 2006. Based on those projections, KNOT is now trading at a forward P/E of 26. "We think online media is a growth area, and the Knot is the dominant media asset in its niche," says Henry Ellenbogen, co-manager of T. Rowe Price’s highly rated Media & Telecommunications fund, which owns around 200,000 shares of KNOT. Investors should keep a close eye on what occurs once retail giant Federated completes its acquisition of May Co., which has a 16% stake in the Knot. (Federated is a shareholder and partner of WeddingChannel.com, the Knot’s main rival.) Should Federated sell May’s shares on the open market, it could put a damper on KNOT for several months. Still, we think this wedding party is worth crashing. fortune.com
