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Angie's List: Worth Around $6 As A Standalone Company, $9 As An Acquisition Target

Angie's List has continued to make minimal progress on improving its key metrics.

Its value as a standalone company is estimated at $5.70 per share. Significant improvements to key metrics may make it worth $8 or $9.

A company such as IAC may realize significant cost savings from an acquisition, making it worth a bit over $9 as an acquisition target.

However, for Angie's List to be worth $11-plus, any acquiring company would have to be very comfortable about realizing massive cost savings from the acquisition.

At its current price of $10.50, there appears to be ample downside potential and limited upside.

Angie's List (NASDAQ:ANGI) is a company that I've covered before on multiple occasions. It has been unable to improve its key metrics or reduce costs to any significant extent before, and membership growth is slowing as user base churn increasingly offsets membership adds.

I had developed a lifetime member value model for Angie's List before, and with updated numbers, it appears that Angie's List should be worth around $5.70 on its own now. I can see it being worth slightly over $9 to an acquirer based on significant cost savings potential. However, its current price of $10.50 appears too high. An acquirer would have to achieve massive cost savings to be comfortable with a bid of $11-plus. As a standalone company, Angie's List would need to make very large improvements to get its value up to that level as well, and I 'm doubtful about its ability to do so.

Angie's List has maintained the same level of user churn for a while. The renewal metrics vary a bit from quarter to quarter, but overall the trend is for unchanged user churn. The average quarterly user churn over the past year was 6.08% compared to 6.13% the year before. I expect that the average member will last for 17 quarters, similar to what I modeled before.

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Average Paid Memberships

2,556,382

2,733,784

2,911,151

3,012,545

3,072,509

3,137,717

3,210,153

Cancellations

141,981

188,653

205,800

148,459

168,271

221,167

222,749

User Churn (Quarterly)

5.60%

6.90%

7.10%

4.90%

5.50%

7.00%

6.90%

Service Provider Revenue

I calculate new service provider contracts by adding the service provider revenue during a particular quarter to the change in the contract backlog from the previous quarter. The rate of new service provider contract growth has slowed significantly in...


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