Angie's List (ANGI) Membership Price Cuts a Positive? Analysts Say 'Yes'

October 3, 2013 8:13 AM EDT Send to a Friend
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Price: $6.69 +0.75%

Rating Summary:
    3 Buy, 16 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 14 | Down: 28 | New: 51
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Analysts are out defending Angie's List (NASDAQ: ANGI) on weakness Thursday amid reports the company is lowering membership fees.

"We believe the weakness in Angie’s shares represents a buying opportunity. We believe lower membership pricing may accelerate member and service provider sign-up and renewal rates, offsetting the impact of price cuts on revenue and LTV," Needham & Company's Kerry Rice said. "The lower prices may also enable Angie’s to lower marketing and selling expense, translating into improved leverage. We expect Angie’s to report 3Q13 results, at least in line with expectations." He reiterated a Buy rating and price target of $30.

Northland Capital Markets analyst Darren Aftahi said while the lower price could be a short term negative, they will be a long-term positive. "ANGI's announcement of “reduced-price tests” for new annual memberships does not come as a surprise, but may bring some near-term volatility to shares. Reduced membership pricing, if it becomes permanent, could potentially adversely affect membership revenue in the near-to-medium-term. However, longer-term, we estimate that 90%+ of ANGI’s revenue will come from service providers (SP). Because we believe this decision could potentially grow its membership base faster, which in turn could accelerate SP revenue growth (as SP ad rates are typically based on the number of members in a geographical region), we believe this is a logical long-term strategy." The analyst has an Outperform rating and $33 price target.

For an analyst ratings summary and ratings history on Angie's List click here. For more ratings news on Angie's List click here.

Shares of Angie's List closed at $20.99 yesterday.


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