Angie’s List: Zacks’Bear of the Day Play

Angie’s List (ANGISnapshot Report) posted a surprising loss for its first quarter of 2016 due to higher spending and lower revenues as it attempts to rehab its online business model, which connects consumers with home service providers, more in line with “freemium” trends.

According to Joshua Jamerson, writing for Dow Jones & Company on April 20…

Chief Executive Scott Durchslag said the company made “good progress” during the period as it rolls out the new model, with higher logins, searches, contract value and reviews in some test markets. The company said it was on track to finish removing its paywall for the company’s online ratings and reviews by this summer.

Though the traffic to Angie’s site climbed about 25% in the quarter compared with a year ago—Mr. Durchslag, on a conference call, said the increase was due to digital advertising and search engine optimization. The higher traffic didn’t translate to greater membership growth or revenue.

Analysts Slash EPS Projections

While ANGI shares tumbled under $7 on that report and then recovered the same day and are higher since, analysts aren’t buying the company’s turnaround strategy. Here’s what they did to earnings estimates in the past week to make ANGI a Zacks #5 Rank…

Notice that the full-year 2016 estimate fell from $0.17 to just $0.05. And 2017 projections were cut from $0.31 to $0.23.

IAC vs. AirBnB

Media Mogul Barry Diller and his IAC/InterActiveCorp (IACSnapshot Report) tried to buy Angie’s List in November, making an unsolicited $512 million, $8.75-a-share bid.

As ANGI management rejected the suitor, shares climbed to $11 in the hoopla, before making a steady descent in the past few months.

Since IAC already owned HomeAdvisor.com, which helps customers find home improvement professionals for free, this was an attempt to corner that market.

But part of the enthusiasm for ANGI shares since their disappointing earnings report may be the announcement made on the conference call. Mr. Durchslag revealed that Angie’s List would partner with home-rental service Airbnb.

While that partnership may be a game changer for the company, it remains to be reflected in either the top or bottom lines. Investors should keep Angie’s List off of their “buy list” until those trends turn around. The Zacks Rank will let you know.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s