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.
-
Use An iPhone? You May Be Hearing From A Class-Action Lawsuit Group
A handful of suits against the iPhone maker seek to crack down on everything from app store purchases to messaging.
By Keerthi Vedantam Published
-
Capital One/Discover: What's In Their Wallet For You?
Push back on Capital One's planned merger with Discover is growing with one group of consumer advocates calling for a public hearing.
By Keerthi Vedantam Published
-
Stock Market Today: Dow Outperforms as Merck Hits New High
The S&P 500 and Dow Jones Industrial Average snapped three-day losing streaks as drugmaker Merck rallied.
By Karee Venema Published
-
Stock Market Today: S&P 500, Dow Extend Losing Streaks
Reddit stock continued to charge higher and has now nearly doubled in price since last week's IPO.
By Karee Venema Published
-
Stock Market Today: Bitcoin, Boeing Shine as Stocks Slip
Digital World Acquisition sizzled, too, ahead of its merger with Trump Media & Technology Group.
By Karee Venema Published
-
Stock Market Today: Dow Retreats After Nike Earnings
The Nasdaq Composite managed to notch a new record close Friday, building on the week's impressive gains.
By Karee Venema Published
-
Stock Market Today: Stocks Hit New Highs as Rate-Cut Momentum Continues
Reddit sizzled in its market debut, while Apple slumped after the tech giant was slapped with an antitrust lawsuit.
By Karee Venema Published
-
Stock Market Today: Stocks Climb After Fed Forecasts Three Rate Cuts This Year
The main indexes notched new record closes Wednesday after the Federal Reserve kept its outlook for rate cuts unchanged.
By Karee Venema Published
-
Stock Market Today: Stocks Close Higher After Nvidia's Reversal
The main indexes erased early losses Tuesday as mega-cap tech stock Nvidia swung higher.
By Karee Venema Published
-
Stock Market Today: Nasdaq Soars on Strength in Magnificent 7 Stocks
The main indexes started the week strong after several mega-cap stocks rallied.
By Karee Venema Published