Angie's List Knocked Down Again
One thing for sure, the stock market is not very forgiving of growth stocks that miss earnings estimates, no matter the amount. In the case of Angie's List (NASDAQ: ANGI ) , the stock continued a month-long collapse after a third-quarter earnings miss. The company that offers paid members access to reviews of local service professionals generated revenue growth of 56%, yet it wasn't enough to meet analyst estimates.
The company remains under extreme pressure to justify how paid memberships outweigh the free reviews on sites like Yelp (NYSE: YELP ) . The difference in stock valuations signals that the market thinks the free versions with larger user bases are more valuable. However, investors need to remember that the market tends to overreact and a reversion to the mean could take place in 2014. Remember that Yelp spent most of 2012 in the doghouse trying to convince the stock market that user reviews were a valuable service.
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