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Earlier this week I received an e-mail from my boss, Ian Wyatt. In the e-mail, he asked me to cover the Angie’s List (NASDAQ: ANGI) earnings report.
“The stock has been left for dead,” he wrote. “Angie’s List stock is at all-time lows, losing around two-thirds of its value since its IPO. The stock trades at less than 1x sales and could break-even in 2015, not to mention recent insider buying. It could be the beginning of a turnaround.”
How right he was. Angie’s List stock jumped almost 60% after the company blew away earnings expectations on Wednesday.
First, some history.
Angie’s List began trading publicly in 2011, surging 25% on its first day of trading.
Angie’s List is a service that connects paying customers with service providers – everything from plumbers to doctors – that have been vetted and reviewed by other Angie’s List members. The business model is essentially that customers pay to get access to highly rated service providers. In turn, the service providers pay to be a connected to Angie’s List members and some even pay extra to advertise through the service.
The Angie’s List stock IPO price was $13 and the stock closed its first day of trading at $16.26. Before Wednesday’s surge, the stock was down 69% since its IPO and 21.5% already this year. But everything changed on Wednesday when the stock surged 59.5%. The stock is now up more than 12% for the year.
Earnings Beat Estimates, Subscribers Climb
Here are some of the key metrics that sent Angie’s List stock surging higher on Wednesday:
- 2014 revenue grew by 28%
- 2014 operating margin increased by 9% points
- Q4 2014 earnings per share of $0.26, beating analyst expectations by 18%
- 1.2 million new subscribers joined in 2014, bringing the total to just over 3 million
- Total Q4 revenue grew 19% year-over-year
- Q4 advertising revenue grew 29% year-over-year
- Q4 service provider revenue grew 26% year-over-year
- 2015 EBITDA forecasted to be $28 to $30 million, 7x 2014’s EBITDA of $4.1 million
- Profitability forecasted for 2015 after a $12 million loss in 2014
In short, Angie’s List blew out analyst expectations and reported strong results. The company is seeing significant improvement in terms of revenue, margins and profitability. The outlook is very positive.
What’s Next?
If you’ve owned Angie’s List stock since its 2011 IPO, Wednesday’s huge surge in share price only served to soften the blow – the stock is still down 47% since its IPO.
Meanwhile, the S&P 500 is up nearly 70% over the same period.
Still, Wednesday’s move higher wasn’t just about the price of Angie’s List stock. The company’s fourth-quarter earnings report was strong, so strong that the thesis has changed. As my boss suggested earlier in the week, Angie’s List just ignited a turnaround that could continue to reward investors for years to come.
After Wednesday’s move of nearly 60%, the stock fell 9.5% on Thursday. Angie’s List stock is down more than 2% today and, until the price holds, I’m inclined to stay away from it. That said, rising revenues, rising margins, rising profitability and rising subscriber counts all point to one thing: the turnaround is here for Angie’s List stock.
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