Cowen Sees Angie's List (ANGI) at $25/Share on Post-Paywall Basis

September 27, 2016 6:52 AM EDT
Get Alerts ANGI Hot Sheet
Price: $7.56 -3.2%

Rating Summary:
    4 Buy, 17 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 17 | Down: 27 | New: 7
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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.

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

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