We will have a follow-up on this piece by the end of the week, as there is more I want to say in regards to Angie's List, a stock that seems to be hated by almost everyone.
One quick Google search and you would wonder why we like Angie's list here. Bears are everywhere rationalizing their short positions with $5 price targets on the stock and calling the company a fraud and a scam. For now I will sum up our bullish case in a few quick points:
- The company is growing revenues at a clip of over 50% year over year. And this is from a company that has been around for 18 years. They have also doubled their subscriber base in less then 2 years to over 2 million. Now is that not growth?
- Bears will cite competition as a catalyst for the impending collapse of Angie's list. Yet i ask, what other premium service offers you what Angie's list does? I always thought you pay for something that gets you value, and looks like 2 million+ folks see value. Not only that, they get a discount.. do the free sites offer that?
- Bad reviews from both subscribers and vendors? Sure Angie's list has some bad reviews and some horror stories, but so does every other company. The fact that both vendors and subscribers have to pay to use the site can add to ones anger when something does go wrong, leading to more negative responses. Also, Herbalife(HLF) is a great example of a good company with bad reviews where folks also call it out as a faulty/fraudulent business model.
- There are now 14.9 million shares sold short which is 36% of the float. An extremely large number and a clear example of folks betting on Angie's List to fail. Checking social media, Seeking Alpha. and other outlets, it is easy to see where the investment community stands on Angie's List. Check out Seeking Alpha where Angie's List is a "SHAM", has "Flawed Accounting", "is About to Implode", "Sharholder Equity is Now Zero"....ect. We love to be contrarians, and this is the type of banter we like to see, especially in a highly shorted equity like Angie's List (ANGI).
In summary, a company growing revenues 50% year over year deserves some high multiples and speculation on future growth. As a bull, we are speculating the growth continues and the stock starts to reflect that.
Why does Yelp, a company with similar qualities, trade at 2x's the value of Angie's List yet does less revenue and is growing slower? I understand they have more visitors, but shouldn't a company that has proven itself to monetize be rewarded?
Either way, we will have more on Angie's List(ANGI) In the coming days and expect it to be trading above $25 this week.
We own OCT 25 and 27.50 calls and will add or sell them at anytime.