ANGI trades below $10 – new all-time low
Shares of Angie’s List (ANGI) co
ntinue to head south today on numerous concerns. The company hasn’t made a profit in 17 years, its venture into daily deals, while adding to revenues, also adds to the financial issues the company is facing. Marketing costs continue to suck up a large amount of revenues generated.
In my opinion, there are three major reasons the company will continue to struggle:
- Angie’s business model involves paying for online recommendations when other online sites make them available for free.
- Increased competition from commission based sites such as Redbeacon.com. The Redbeacon tie to the number one home improvement retailer will, in my opinion, become an ominous foe.
- Attracting additional advertisers to improve efforts to monetize the site.
According to Erika Morphy at Forbes, I am not the only one that feels this way. Mark A. Holder, Chief Investment Officer at Stone Fox Capital Advisors stated that: “Each city the company moves into requires infrastructure, office space, account managers and so on.” In a way, he said, it is like a retail operation that has to build a new store in each city.”
It’s not hopeless, Holder says. Angie’s List “does have a unique service of user reviews and a long history so I think ultimately the key is to getting the investment community to better under the real revenue model.” Maybe in six to twelve months as the stock bottoms out and revenue keeps ramping up, the stock could become attractive, he speculated.
I am not so sure about that. ANGI had an opportunity, before going public, heading into the housing bubble to solidify itself. Individuals and companies have to take advantage of major shifts in the economy when opportunities are presented if they are to survive, let alone thrive. Those that don’t will pay the ultimate price and be left behind, or dissolve completely.
ANGI shares are trading at their lowest levels while the markets have staged an impressive rally. This is not a good sign for Angie’s List. It’s also important to remember that this is an election year and that our economy may not be as rosy as being depicted. Jobs should have improved as baby boomers began to retire, but those numbers aren’t meeting expectations either. Any economic setback into a recessionary state could be devastating to Angie’s list.
The numbers
ANGI, as of this writing, is trading at $ 9.75 down $ .89 (8.36%). Volume is brisk at 722,000 shares, already 53% above normal and there is still over an hour left in Monday’s trading session. The shares have traded as low as $ 9.70 which again set an unfortunate new all-time low since the company IPO’d.
Shares are trading 25% below the 8.8 million shares that were offered at $13 each last year. As recently as August 8th the stock began printed $14.00. It is quite possible that by breaking the $10 level today, some institutions and funds may have had to bail on their ANGI holdings based on charter regulations. Resistance is at the $ 10.77.
The valuation algorithm I use values ANGI at $ 1.22 per share. Yes, you read that right, $ 1.22 a share. That being said, ANGI is extremely overvalued compared to its reduced price of $9.75 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease.
