Angie's List Fourth Quarter Results: Buying Opportunity or Further Downside Ahead?

On Wednesday, Angie's List ANGI reported its fourth quarter results. The company announced an EPS of $0.05, missing the consensus estimate by eight cents. Revenue of $68.8 million beat the consensus estimate of $68.5 million. Angie's List guided its first quarter revenue to be $71.5 million to $72.5 million, below the consensus estimate of $74.1 million. Investors reacted negatively and shares traded lowered immediately following the earnings release. Is a further downside warranted or are shares attractive at current valuations? Barrington Research: Attractive entry point Jeff Houston, analyst at Barrington Research said that shares appear to be attractive following Wednesday's after market decline. “Gross member additions declined three percent year over year and cost per acquisition increased 33 percent as Angie rolled out a new member-join platform, experimented with product positioning (e.g., ecommerce), and marketing dollars were diverted away from member signup given the aforementioned changes,” said Houston in a research note to clients. “On the positive side, both sales force productivity and market penetration improved in all cohorts as we expected and marketplace revenue was up 70 percent year over year.” Houston believes that Angie's operates a solid business with a sound business model and believes that the recent 15 percent decline “could prove to be an attractive entry point as the Q4 changes come to fruition in 2014.” “Furthermore, we like its revenue visibility, differentiated offering, ability to increase advertising prices, and operating leverage.” Shares are Outperform rated with a price target of $25. Stifel: Management could do better to calm investors Jordan Rohan, analyst at Stifel said that Angie's quarterly results contained a mix of positives and negatives. Angie's List was able to reach the high end of revenue guidance but “while reaching guidance is a positive, the cost to acquire members is increasing, growth in advertising clients continues to decelerate and net advertiser ARPU (average revenue per user) ex-ecomm is faltering,” said Rohan in a note to clients. “In our opinion, management has not outlined a sufficient plan to improve these metrics.” “Internet platforms with large addressable markets (TAM) need to consistently deliver solid operating metrics that cycle upward toward a larger future business opportunity,” said Rohan who noted that the company's third quarter results showed signs of weakness which carried over to Wednesday's earnings. Despite a 15 percent decline in share prices after the earnings report, Rohan felt it necessary to downgrade shares to Hold from Buy with no price target. Previously, the analyst had a $25 price target. Deutsche Bank: Staying on the sidelines Lloyd Walmsley, research analyst at Deutsche Bank said that Angie's List's quarterly report contained plenty of reasons for investors to be concerned. “Angie's List's 4Q results leave us more confused as to what's going on at Angie's List and how the company solves its challenges,” said Walmsley in a note to clients. “Sales force efficiency showed no improvement six months after the ramp in hiring, renewing our concerns around P1 SP revenue. Problems deepened in the consumer-facing side of the business with CPA spiking in the quarter, reflecting more defensive marketing/growing competition.” “While the company pointed to changes in the user funnel, either something is not working in the existing funnel or marketing test execution is poor, or both.” Walmseley, like Rohan feels that management has done an insufficient job in reassuring investors. “Commentary around impending changes was vague,” said the analyst. Shares are Hold rated with a price target lowered to $13 from a previous $16.