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Angie is a nice gal, but is only a YELP away from deflating.

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19

November 18, 2011 – Comments (7) | RELATED TICKERS: ANGI

The S&P wiggled and though I tried, a few other players got an edge on me on the overall score on Angie's List's opening debut.   

Poor Angie's List, Inc is not getting a very good welcome here on CAPS.  97% downthumbs in the first 60 calls and it's hard to say if even an upthumb is just a contrarian call on someone's part similar to my tongue in check upthumb on Groupon last week. 

Angie's List, Inc hasn't been the popular caps play (in either direction) as our friendly Groupon and LinkedIn were.  The equity opened too late on CAPS to get the early overshoot one typically finds in “popular” IPO's.  I say “popular” in this case in that despite the negative press on the company's current and future financial outlook and the opinion on CAPS, it débuted well above its IPO release price.  The shares traded in the $16’s,  20% above the IPO price.  Backers of an IPO have to be careful to try to get the recipe just right.  If the stock soars too high above the IPO price then they get judged as leaving too much on the table. If it flops below the issue price it appears they duped the early investors. 

Angie’s List’s small share offering no doubt helped with the upside attraction. Only 8.8 Million shares were offered.  Of the 8.8M, 2.5M belonged to insiders and won’t go to the company’s coffers.  It’s good to see loyal hardworking insiders get some profit on a company they nursed from infancy, but I often wonder if their new found Millions will cause them to lose focus in the company.    

The money raised will be used for advertising.  This is necessary for a subscription based company, but Angie’s List has been advertising for years with little incremental gain.  I’ve heard their ads as a supporter of NPR so many times over the last three years that I can finish the announcer’s sentence.  (No NPR comments, when you commute as much as I do in rural areas, NPR is a nice compromise to static, especially if you’re too cheap to keep your XM radio subscription paid up). 

The problem with money raised for advertising is that once it’s spent, it can’t be replaced unless your subscriber base grew.   

Some posters are already making fun of the company name, but I think it’s fitting.  A service offering reviews on local services needs to be personable.  Let’s just hope Angie doesn’t see the new one star rating from CAPS and decide to start rating investment services.  WE could all make multiple upthumbs on Motley Fool on Angie’s List and I’d bet the Angie List computer would single out the negative ones! 

From a financial standpoint, it’s highly questionable if Angie’s List can garner enough subscriptions to ever make a profit.   $62 Million in subscription revenues in the last 9 months is fairly impressive, but costs continue to mount and Angie’s List still posted a $43 Million Net Loss.  The 50% revenue growth YoY was dwarfed by rising costs. 

Angie’s List also has competition, and the competition is currently free which is a big win for anything internet based that users aren’t willing to pay for.  How often you need unbiased reviews that you can’t get for free has to be somewhat limited.   Angie  has a bit of a moat in the format she uses, but competitors can duplicate the overall concept. YELP, Inc a competitor of Angie’s List filed for an IPO this week as well.  YELP has fewer frills, but is free.  Charging a subscription does give the impression of being unbiased, no lobbying, but I don’t think most users of this type of service care enough about this to pay for it.   Angie has a bit of an edge in that their service provides phone support.  You’d better have superior customer service if you’re paying for it! 

Overall, Angie’s List stock price appears to have a floor in the $15 price range.  The float is too small and the novelty of IPO’s means winners out the gate have an edge for awhile.  Eventually shorts will have a chance, options will be listed and Angie’s List will seek a price range more attuned to it’s current value.  I see limited growth opportunity unless they diversify and find some way to interest more city dwellers rather than mid-small town subscribers.  I would expect, small float or not, to see Angie’s List share price drop gradually over time, especially if YELP shows some bite to it’s own bark.

I'm a little surprised in the first opening pitches on CAPS that someone didn't upthumb with a comment that they like and use Angie's list. I'm a serious propoent of buy what you know, but the fact you use something shouldn't be the only financial metric in your arsenal.  Overall, however, it might be just as good as combining a bunch of other metrics in this erratic market.  Buy a little Colgate, some Kleenex, some Coke, your favorite restaurant, some Shell or wherever else you get your gas.  Put together a list of 15 things in a diversified list of things you personally like.   Allocate your retirement assets between them and don't think about things, (well other than how you're going to reinvest the penny's left from SYMS, CROC, Talbots, etc if they go bankrupt).  How dare the rest of the investing community not share your tastes!!??

 

7 Comments – Post Your Own

#1) On November 18, 2011 at 1:50 PM, TSIF (99.96) wrote:

Oops, must have been distracted, I forgot the most important part of my blog entry:

TSIF  (The Sky Is 'not" Falling today), but it's early still.

 Disclaimer, if I knew anything, would I be posting here?  ;) 

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#2) On November 18, 2011 at 2:07 PM, JTMcGee (34.87) wrote:

This explains exactly my reason for the red thumb.  I got a bad price at <$16 short.  But I'm sure that this company is more than fairly-valued.

I also remain skeptical that the demand is there.  Not just because there are other reviews for free, but because the service is most valuable to people who move from one location to another.  Mobility is awfully low right now.  That only compounds on the fact they're losing money.

I'll be downthumbing most new IPOs.  Yelp is incredibly overvalued if it's IPO gives to a $1 billion valuation.  I'll redthumb that, too.  Only company I might not downthumb, depending on the numbers, is Zynga.  We'll see when the time comes, though.

You have any thoughts about Zynga? 

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#3) On November 18, 2011 at 2:54 PM, TSIF (99.96) wrote:

Hi JtMcGee,

 As with any IPO, it will need the dust to settle to see if it's an investment for the "common man".  I can't follow the share count to see what the net market cap is targeted at.  Of all the recent social media IPO's it might be one to watch if it doesn't go crazy on it's debute as LinkedIn did.  How LinkedIN could go about 50% above it's subscription price is a mystery that will never be answered with a rationale reason.

The social gaming craze has caught on in a big way. Zynga found a way to generate revenue that was a bit unique by selling "items' in their gameworld. Their relationship with Facebook makes the play and clearly that would need to continue.

The growth looks substantial. I'm always skeptical of numbers toughting stickiness, unique hits, adn MAV, etc, but Zynga appears to have it listed reasonably.  232 Million active users in 166 countries may be hard to substantiate, but shows solid growth. Net Revenue has increased 4X each of the last four years.  I don't think I'd short them either out the gate under normal value metrics, but if the IPO goes LinkedIN hot then it wouldn't be normal fair valuation you'd be downthumbing, it would be the typical IPO insanity. Unlike Angie, the float might be big enough to see some churn, but overall the IPO's that hit the street above their issue price are showing some ruggedness the first few quarters. That won't last in the long run, but appears to in the short run.

Thanks for the comments, good luck!

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#4) On November 18, 2011 at 2:55 PM, TSIF (99.96) wrote:

PS Zynga filing if anyone has more tolerance for sorting through the stock than numbers than I do!

http://www.sec.gov/Archives/edgar/data/1439404/000119312511180285/ds1.htm#toc198836_10

 

 

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#5) On November 18, 2011 at 5:03 PM, amassafortune (29.60) wrote:

I was an Angie's List subscriber for one year because of a discount a roofer gave if a review was done after a job. I did not reup the next year.

I just started using YELP a few weeks ago and TSIF is correct - it has all the value of Angie's List at no charge. 

I shorted ANGI in CAPS yesterday. Up +4 so far. I'll close it above +5 after the 7-day waiting period. ANGI won't be a major stinker of a stock pick, but neither will it be a long-term, moat-forming winner. 

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#6) On November 18, 2011 at 5:57 PM, TMFRosetint (94.70) wrote:

Good blog; I enjoyed it.

 Pennies from SYMS, though? I think that's just a bit pessimistic, though I'll admit the price hasn't moved to a level I'd be comfortable investing in the company with any decent margin of safety. 

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#7) On November 18, 2011 at 6:44 PM, TSIF (99.96) wrote:

Thanks amassafortune.  Angie might be able hold her own, especially against the S&P in a down market. IPO's that come out above offering price seem to have some resistance for a few months. 

HallShadow...bad example on my part, other than no one will be shopping there in a few months, assets aside.  I was just thinking of bankrupt company's in my example that liking a company from a useage standpoint  is not a stand alone metric for a good investment.

I will admit that they are holding up extremely well after the initial selldown as they left the mainboards.  Apparently all the volume the week or so before thinned the institutional investors who couldn't hold non-liquid equities.  Volume has tricked and it's hard to see how they will wind everything down. They will have to do it with a one time special dividend once everything settls.  I still don't have high hopes for the final end game.

 TSIF

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