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Angie's List: 3 Reasons For Reversal Of Fortunes

While the headlines for Angie's List Q3 report were on the negative side, many investors did not read between the lines.

The positive EPS surprise means that the new CEO is very serious about putting the finances of the company in order.

And because about 25% of the float is sold short, if that happens, expect the stock to double over the next 12 months.

So there I was Wednesday morning, when I start reading the latest quarterly report from Angie's List (NASDAQ:ANGI). My first impression was that on balance, things were ok and I did not think the stock would do much at the open.

So as Wednesday's session begins, ANGI is marked down by about 15% at the open. I start scratching my head. Then I scratch my head some more, when on my IB terminal (Interactive Brokers) I see a red light next to ANGI's stock, indicating that there are no shares available to sell short. "When did all these guys get a chance to short the stock?" I asked myself.

Anyway, as I was looking over the results one more time - to make sure I understood why the stock was taking a beating - I kept scratching my head.

Anyway, to make a long story short, anyone who shorted ANGI into or prior its quarterly report has been burned, and anyone who sold ANGI short over the last several months has been fried. Let me explain why.

ANGI reported Q3 net income of $82,000, or EPS about $0.01 per share. However, the market was expecting a loss of $0.05 per share, so ANGI surprised to the upside by a lot.

Yes the company missed on revenue, but is almost $3 million in revenue such a big deal compared to the EPS surprise? I think not.

Something else that was headline news was the fact that the company lowered full-year revenue. Indeed...