Angie's List business model in doubt
Is the stock's recent pullback a buying opportunity, or the start of a breakdown as it struggles to compete with free rivals like Yelp?
By Neal Rau, Stock Traders Daily
Shares of Angie's List (ANGI) plunged as much as 16% after the company disappointed Wall Street with its second-quarter earnings report in July. The company lost 25 cents per share, which was an improvement from last year's 41-cent-per-share loss.
The stock is up 117% over the past 12 months, but has now fallen over 25% since July 1. So, is the recent pullback a buying opportunity, or the start of a downtrend in the stock?
Angie's List spends about 80% of its revenue on sales and marketing, and charges for its services, while competing against Yelp (YELP) and IAC's (IACI) Home Advisor, both of which offer similar services for free. As a paid service, Angie's list has a much lower subscriber growth rate and fewer unique visitors. To give you an idea, Angie's List has just recently reached 2 million subscribers after 18 years of doing business. Yelp added almost 3.5 million reviews last quarter alone.
Of course, Yelp offers a much broader range of reviews, and not just services. Yelp averages 108 million unique visitors each month, and about 32% of those are from mobile. During the second-quarter conference call, Yelp's CEO cited a study by Nielsen that found that when consumers find a local business on Yelp, 89% make a purchase within a week. Angie's List will need to find new ways to compete with impressive numbers like that from competitors.
Shares of ANGI recently broke below support based on the report offered by Stock Traders Daily, which has now converted to resistance, and the stock is currently sitting below converted resistance accordingly.
Angie's List acquired start-up SmartHabitat for $2.65 million in an effort to transform local service and improve user experience. The company said it plans to build a new platform that will include web, mobile and call centers. The new tools and interactive content will allow the company to provide a more customized experience for members, tailored to their specific interests. Angie's List is betting that the consumer will chose premium features and reviews for a cost, over a higher volume of reviews for free. That's fine, but the company is not profitable and carries about $14 million in debt -- so it can't afford a misstep.
Angie's List has been able to increase the subscriber count by decreasing membership fees in the past, but the company also raised service providers' participation fees at the same time. Over the past 3 years, quarterly revenue per subscriber decreased 34%, while revenue per service provider rose 64%. Service companies might consider paying for ads on Yelp or Google if fees become unreasonable.
If the company continues to operate with an older business model, Angie's List will have to find innovative ways to compete with free services like Yelp and HomeAdvisor. And if it struggles to find new ways to add subscribers and revenue there will be pressure to reduce prices to consumers.
The stock is still up over 75% year to date, but since making all-time highs in early July, shares have fallen sharply. According to the real time report offered by Stock Traders Daily, long-term support has just broken lower, which raised sell/short signals. As long as the stock remains below long-term support (now converted resistance), we expect shares to trade lower.
MSN Money on Twitter and Facebook
Another seemingly prudent idea that began legimately(?) and eventually falls into a quasi- fraud model.
Not disappointed/surprised anymore.
I did not like Angie's list for several reasons. Anyone and everyone can ( AND DO) post false comments regarding "complaints" or "compliments" whether customer or business. Happens on other sites as well. I know many business owners that do this routinely. They often ask employees, relative, friends to post how great they are. Some will even put false complaints about competitors.
If there is a complaint against a business there should be a clear and concise way for that business to put a reply or "the other side of the story" on there. Try finding it on Angie's List. Its literally buried if there at all.
I understand their business model is about wanting to inform consumers etc. But how do you know what is and what is not a true review or problem? I've seen people in my profession, for instance, that I would NEVER seek services from. Yet they seem able to routinely get noted as wonderful on Angie's List. A true consumer forum MUST have both sides of the story and the resolution of a problem. Being "one sided" is helping no one.
Lastly, Angie's List is expensive to join and I just didn't feel I got anything of value from it. There can be many reasons why one person will like a particular business or service and reasons why another person won't.
angie is a crook herself and I hope her list gets thrown in the trash where it belongs.
Angie list is a fad. Have you seen the people in their commercials...sheesh...
Kind of embarrassing to part of that gay goofy train.....
Also Angie list is for dumb people who don't have any friends and don't know
how to use a phonebook.
Copyright © 2014 Microsoft. All rights reserved.
Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.
Hand-carved from an aluminum block, the 128-gigabyte ZX1 resurrects the iconic portable music player -- minus the cassettes -- for premium buyers in search of high-quality audio.
VIDEO ON MSN MONEY
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'