Angie’s List, Inc. (ANGI:NA) Our SELL thesis as outlined in our August 20, 2013 Initiation report has played out with the stock declining approximately 50% from that date.
April 29, 2014
By Senior Analyst
- We include the points of our initiation thesis along with most recent financials and estimates for reference purposes only.
- At the time of initiation, ANGI’s high valuation was excessive considering the low barriers to entry, legacy competition, and limited advertising spends from local businesses.
- The company’s revenue growth depends on advertising from its participating local service providers which is dependent on a rapidly growing paid membership base. The high member churn rate continues to raise growth concerns.
- We expect ANGI will not generate positive operating or net profits during FY:14. If ANGI becomes profitable in FY:15 as expected, investor focus will shift to margins and levels of profitability, which may not be good for valuations.
- Although still showing very strong growth rates across most metrics, many of those growth rates have been decelerating recently.
- Gross membership adds during Q1:14 were 286.6k, a increase of 4.3% from 274.9k in Q1:13. Net adds were only 143.8k implying the member churn rate remains high.
- Cash levels at the end of Q1:14 were $64.6 million which increased from $55.9 million in Q3:13 due to positive working capital management.
- We drop coverage to focus our resources on actionable names with greater certainty of positive returns.
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