Pacific Crest Raises Angie's List EBITDA Outlook After Meeting With Management

Pacific Crest’s Evan Wilson maintained a Sector Weight rating on Angie's List Inc ANGI.

Free Tier Introduced

Following the company’s investor day, Wilson noted that Angie’s List will now have a “free tier, as we've long hoped for, which should reignite user growth and uncap the two-sided marketplace.”

Wilson expects the benefits from this shift to accrue fully in 2017, while 2016 would a difficult to forecast transition year for the company. However, the analyst mentioned that he viewed the company much more favorably, given that it might be a “rare SMID Internet company with user growth and margin leverage.”

Angie’s List has introduced a fully free tier that also offers the option to upgrade to the different paid tiers. This follows the company’s legacy subscription paywall led to 90 percent of the traffic bouncing off the site.

Free Tier to Drive User Inflection

“While it's difficult to model, we think the news of a free Angie's List will drive an inflection of user traffic and subsequently be much more attractive to service providers,” the analyst said.

Wilson believes that by doing away with the mandatory subscription and reducing marketing spend, Angie’s List was likely to witness user growth along with margin expansion in 2017.

The revenues and EBITDA estimates for 2016 have been raised.