Has Angie’s List Inc (ANGI) Finally Turned the Corner?

Other User Review Stocks

Yelp provides the most comparable company though it focuses as much on restaurants and retail stores as service professionals. The free access does reduce the quality of the reviews, but it also allows the company to have 86M monthly unique visitors or over 50x the user base of Angie’s List. The company actually has a smaller revenue base, but a stock valued higher at $1.35B. The major reason for the higher valuation is the expectations for 2013 earnings for Yelp to approach breakeven.

Conversely, TripAdvisor has already become what these other two review sites want to reach. Due to the quicker adoption of internet advertising for travel, the travel review site has already reached a market cap of over $6B and a revenue base expected soar above $900M in 2013. The company is soundly profitable with earnings exceeding $1.50 this year.

Total Return Chart

Prior to the surge in the stock today, Angie’s List had a negative return since the November 2011 IPO. As the chart below shows, the highly profitable TripAdvisor has easily outperformed the two money losers:

ANGI Total Return Price data by YCharts

Conclusion

The company has potentially changed the corner with a reduced marketing spend level, but the path to profitability remains a major question. Even these better results still leave the company deep in the red. Questions still remain as to whether the company can generate the membership growth by cutting back on the massive sales and marketing machine needed so far to generate users.

If the company can continue picking up members at a reduced cost, Angie’s List could eventually have a homerun stock. The dream would be for service providers to eventually come to the company for advertising instead of having a massive sales force. For now though, it remains a major question whether users will actually flock to a service to pay for reviews. The advancement of social media could eventually be a major roadblock as users can quickly tap groups of friends for the best plumber instead of a random member on Angie’s List.

Time will tell, but the company still hasn’t figured out how to generate consistent profits to jump into it at these valuations.

The article Has Angie’s List (NASDAQ:ANGI) Finally Turned the Corner? originally appeared on Fool.com and is written by Mark Holder.

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