Cowen Sees Angie's List (ANGI) at $25/Share on Post-Paywall Basis
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Cowen and Company boosts its price target of Market Perform-rated Angie's List (Nasdaq: ANGI) from $10 to $11, offering a post-paywall outlook on the company.
The firm commented,
We analyzed the Angie's List post-paywall outlook and found: (1) Angie's List would be worth ~$25/share now, if on a path to hit the company's FY20 targets; but (2) signals from results have been mixed and cast doubt on underlying trends; and (3) the latest usage data is ambiguous. Raising PT to $11 as we like turnaround + takeout options, but see near-term trends as likely weak.
Kopelman elaborated on the firm's three possible scenarios for Angie's List:
- Starting with our positive "Upside 2" case, we used management's stated FY20 targets of $750M revenue (~23% 4-year CAGR vs. our FY16 est.) and $150M EBITDA (~60% CAGR), introduced at Analyst Day in March and reiterated at an August appearance. We est. this would require ~135k ending paid Service Providers (SPs), vs. 55k today, and would translate to almost $1.00 of GAAP EPS. We used a 35X forward P/E (16X EBITDA & >3X Sales), given the company would likely still be experiencing rapid growth, driving an NPV of ~$25 discounted back to today.
- For our "Upside 1," reflecting solid traction, we project 100k SPs, $100M EBITDA, and ~$0.50 EPS, driving a $12 NPV on 30X P/E discounted back (11X EBITDA, ~2X Sales). For our Base Case, reflecting muted traction or a "stop the bleeding" scenario, we project a revenue CAGR of 6% (vs. y/y declines today) to $421M and EBITDA CAGR of 22% to $50M, driving a $5 NPV on 1.0X Sales discounted back.
- We note an est. 20% range on share count among scenarios, from 62-75M, given 7.4M options outstanding at ~$10 strike, 2.3M RSUs, and 3.6M Performance RSUs (PRSUs), including a grant of 3.0M PRSUs at the end of Q2, vesting over three years, that could double to 6.1M if certain targets are met.
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