Editor's note: This Stocks Under $10 alert was originally sent to subscribers Nov. 6 at 9:57 a.m. EST. It's being republished as a bonus for TheStreet.com and RealMoney.com readers. Frank Curzio heads TheStreet.com Stocks Under $10 Investment Team.

We are initiating a 1,000-share position in

Move.com

(MOVE)

, which was recently trading at $4.84. The online company provides advertising and marketing services to the real estate industry, and we believe this Inflection Point stock -- a company in our rating system that has a broken business model but is on the mend -- offers a favorable risk/reward at the current price.

Just like

Drugstore.com

(DSCM)

, one of our model-portfolio holdings, Move.com was an Internet highflier, trading as high as $138 a share in January 2000 before falling back to earth.

Now we believe that Move.com is undervalued based on its leverage to the real estate advertising market, strong financials and key initiatives.

Some of Move.com's Internet properties include Realtor.com, which is the official site of the National Association of Realtors trade organization and focuses on the existing-homes market; HomeBuilder.com, which focuses on new homes; RentNet for apartment rentals; and Moving.com, move-related services.

These sites provide Move.com with a niche in the online real estate market, which is seeing strong advertising growth.

Over the past five years, the housing market has been robust, with housing prices increasing more than 20% annually in some areas because of record-low interest rates. Now that interest rates are closer to historical norms, the white-hot housing market -- which some analysts described as a bubble -- has cooled.

While this may be perceived as a negative for Move.com, the fact that listings need to be advertised online for a longer period of time bodes well for the company.

Online real estate advertising is a $20 billion-a-year industry consisting of 100 million consumers searching for real estate information, and Move.com holds a 25% market share. Investment firm Needham estimates that the real estate advertising market as a whole is growing at a 2% annual pace, but the online portion of the market is growing in excess of 20% each year.

We believe this number will continue to grow based on the continued migration from offline to online advertising among real estate firms.

As the real estate advertising market has expanded, Move.com has launched several initiatives to improve its competitive position. One of these is an auction-based cost-per-click (CPC) pricing model, the type of model used by top online advertising companies such as

Google

.

Another initiative is Top Marketer, a system that allows Move.com to sell its leads from buyers and sellers to real estate agents. Based on rivals' success with similar initiatives, we believe these strategies will benefit Move.com in 2007 and beyond.

On the financial front, Move.com's balance sheet is solid, with $164 million in cash and only $4 million in total debt. This should help fund the company's marketing initiatives going forward and ease any solvency concerns that are common for low-priced stocks. On an earnings-per-share basis, the stock is trading at about 35 times next year's estimates, but its long-term growth rate (three years) is forecast to grow more than 60% annually based on consensus estimates.

Looking ahead, we believe the future is bright for Move.com. Moreover, the company seems to agree: Management predicts that its long-term financial targets for revenue growth of 20%-plus and EBITDA (earnings before interest, taxes, depreciation and amortization) margins of 20% will be achieved by 2007-08. If these goals are met, shares could move significantly higher in the next 12 to 18 months.

Given Move.com's current price, initiatives and solid financials, we believe the stock has a very favorable risk/reward for investors with a 12-month time horizon.

In keeping with TSC's editorial policy, Frank Curzio doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Frank X. Curzio is a research associate at TheStreet.com, where he works closely with Jim Cramer and and writes

TheStreet.com Stocks Under $10

. Previously, he was the editor of The FXC Newsletter and senior research analyst for Greentree Financial, and passed his Series 7, 63 and 65. He appreciates your feedback;

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