Angie's List Up for Sale: Who Will Be ANGI's Angel? - Stocks in the News

Shares of Angie's List (ANGI) are currently up 20.81% on a report that the company has hired bankers to explore a possible sale.  The online website is a member-only YELP (YELP) of local businesses and is working on increasing its business platform by allowing people to purchase services just as they do products.

The online company generates revenue via membership subscription, advertising, and deferred revenue.  The company charges members for access to crowd-sourced reviews of local business, including home repair companies and professional services.

Disappointing Year

Shares have lost about 70% in the past year and hit a 52-week low of $6.28 per share on Tuesday.  Since the news of a possible buyout, the stock nearly hit $8 per share.

The company reported a loss of 31 cents per share, 8 cents greater than the estimated loss of 23 cents per share.  They reported quarterly earnings of $79.8 million, disappointing consensus estimates of $80.2 million. The company has racked up losses in almost every quarter since it went public. Its second-quarter loss this year amounted to $18.4 million.

The company employs about 1,900 employees, most of them in Indianapolis, where it has headquarters in a cluster of renovated buildings on the Near Eastside.



The Cost of Marketing

According to a Chief Marketing Officers Council survey in 2010, they conducted a study of its 6,000 chief marketing members to assess marketing and advertising spending across a wide range of industries.  The survey results revealed that 58 percent of chief marketing officers spent less than 4 percent of gross revenue on marketing.

According to their quarterly statement, Angie's List spent 39% of total revenue on marketing in the first half of 2014, the highest percentage of revenue used in operations.  This is the trouble with their current business model; the huge emphasis on marketing expenses in order to secure new members.

Possible buyers

The logical buyers from an investor standpoint would be the companies that can afford to put up the capital while being able to stay solvent long enough to reap synergy benefits from Angie's customer base.   The purpose would be to move Angie's list from paid to free review which would then complement online sales of that respective company and cut marketing costs.  Companies like Home Depot (HD), Amazon.com (AMZN), or Google (GOOGL) could try to get into this market in order to expand their local reach. 

Groupon (GRPN), the largest daily-deal website who also relies on local businesses is currently down 1.80%. 

Bottom Line

There have been much in the news of M&A and given Angie's list recent track record, it will not be a surprise if Angie's List gets bought out soon.  Companies such as Home Depot, Amazon, or even eBay might utilize this opportunity to gain a broader customer base while being able to expand into another sector of business. 

Investors should keep a lookout in M&A to see if any companies put out a bid for the consumer-review website, and if ANGI is able to keep up this short-term momentum.  

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ANGIES LIST INC (ANGI): Free Stock Analysis Report
 
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