Mixed Reviews on Angie's List
The online forum for business reviews may be your go-to site for company recommendations. But the stock may not be so reliable.
Need a plumber? You might go to Angie’s List, the online grader of consumer services, for a highly recommended one in your neighborhood. The site is a clearinghouse for service providers, giving grades of A through F for medical, auto and home-repair services. But does Angie’s stock (symbol ANGI) get high marks? That’s a dicey question.
The company went public last November at $13 per share and closed at $16.26 on its first day of trading. The stock has been on a roller coaster ever since, closing at $14 on May 4.
Part of the reason for the volatility is that Angie is likely to continue losing money at least through 2013. So analysts are making judgments based not on their estimates of future profits, but on the degree to which they believe in Angie’s business model.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That model involves selling subscriptions to consumers who need reliable referrals to local doctors, mechanics and contractors. The company then encourages those subscribers to contribute reviews of the same vendors based on price, punctuality, professionalism and service. The expectation is that more subscribers will bring more ratings; the more ratings, the more valuable the subscription. Rated companies can’t alter their grades on Angie’s List, but they can advertise to increase their prominence in the rankings.
The catch is that getting people to pay for subscriptions and vetting their reviews is a costly process. In the first quarter, Angie spent $82 on marketing to acquire each new paying member. That dwarfs the annual membership fee, which costs $30 to $50.
The number of members, 1.2 million at last report, is rising rapidly, but so are the site’s overhead costs. Angie lost $13.4 million on $31 million in revenues in the first quarter, compared with a loss of $9.6 million on revenues of $17.6 million in the same quarter a year earlier.
Analyst Shawn Milne, at Janney Capital Markets, thinks Angie’s List has the “secret sauce” to make the business fly and rates the stock a “buy,” with a $19 “fair value.” But Sameet Sinha, an analyst with B. Riley & Co., isn’t convinced. He rates the stock a “sell.” He says the costs of acquiring and retaining subscribers will result in years of red ink.
Kathy Kristof is a contributing editor to Kiplinger’s Personal Finance and author of the book
Follow her on Twitter. Or email her at practicalinvesting@kiplinger.com.
Kiplinger's Investing for Income will help you maximize your cash yield under any economic conditions. Download the premier issue for free.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
-
Earn Delta SkyMiles Worth Up to $1,800 with an AMEX Business Card
Delta SkyMiles and American Express offer 150,000 on business credit card for new cardholders.
By Ellen Kennedy Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Tumble Amid Slower Economic Growth and Rising Prices
Disappointing readings on GDP and inflation helped tank equities.
By Dan Burrows Published
-
Stock Market Today: Stocks Run Out of Steam Ahead of Meta Earnings
The Dow Jones Industrial Average snapped a four-day winning streak after Boeing's first-quarter results.
By Karee Venema Published
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published
-
Stock Market Today: Markets Rebound Ahead of Big Week for Earnings
Equities rallied on easing geopolitical tensions, upcoming quarterly results.
By Dan Burrows Published
-
Stock Market Today: Nasdaq Spirals as Netflix Nosedives
A big earnings boom for credit card giant American Express helped the Dow notch another win.
By Karee Venema Published
-
Stock Market Today: S&P 500, Nasdaq Extend Losing Streaks
The two indexes have closed lower for five straight sessions.
By Karee Venema Published
-
Stock Market Today: Dow Slips After Travelers' Earnings Miss
The property and casualty insurer posted a bottom-line miss as catastrophe losses spiked.
By Karee Venema Published