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Yelp Inc (YELP), Tripadvisor Inc (TRIP) & Angie’s List Inc (ANGI): Three Risky Review Site Investments

What is Angie’s List?

If you’re going to hire a plumber, contractor, or doctor, then you might want to check Angieslist.com first. You would be in good company considering 2 million households across the United States use Angie’s List Inc (NASDAQ:ANGI) regularly. Not only will you find certified reviews on whomever you might hire, but you will also receive discounts on home projects. Furthermore, Angie’s List offers a Complaint Resolution Team in case any issues arise.

The downside with Angie’s List Inc (NASDAQ:ANGI) (for consumers, not investors) is that there are membership fees. Members can sign-up for just $4.40 per month, but that would come with a $10 sign-up fee. If members sign-up for one year or more, then the sign-up fee is waived. Members will also pay less if they sign-up for more years. If they sign-up for one year, for instance, then it will cost them $39; if they commit for two years, however, then it will only cost them $70.

All of this might sound great for Angie’s List Inc (NASDAQ:ANGI), but it’s not nearly as popular as Yelp Inc (NYSE:YELP) or TripAdvisor. On Alexa.com, it ranks no. 2,392 in the world and no. 539 in the United States. However, it’s global rank has increased 308 spots over the past three months.

Revenue has consistently increased on an annual basis, but Angie’s List has delivered two years of losses, and four of the last five quarters have been in the red. Yet another concern is the rising popularity of Thumbtack.com, which is a similar site where only service pros pay fees, not consumers. At Thumbtack.com, you type in what service you want and an email with five quotes is emailed to you. If Thumbtack.com gains traction, then there will be little reason for consumers to use Angie’s List Inc (NASDAQ:ANGI).

Fundamentally speaking

Yelp Inc (NYSE:YELP) has been in the red for years, it is currently trading at 215 times earnings, and its profit margin is -9.03%. These kinds of numbers shouldn’t inspire investor confidence. As stated above, aggressive expansion comes with costs.

Tripadvisor Inc (NASDAQ:TRIP) has consistently delivered profits, it’s trading at 28 times its earnings, and it sports a profit margin just north of 25%. TripAdvisor also offers broad geographic diversification.

Angie’s List Inc (NASDAQ:ANGI) has been stuck in the red, it’s trading at 84 times earnings, and it has a profit margin of -26.79%. A new competitor might also steal significant market share going forward.

Conclusions

All three companies own high short positions simply because review sites aren’t where investors will flock to if the economy heads south. These investors known that either consumers will cut down on their purchases or service professionals and advertisers will cut their budgets to save money.

All three investments are high risk, but TripAdvisor is likely to offer the most upside potential.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. The Motley Fool owns shares of Tripadvisor Inc (NASDAQ:TRIP).

The article Three Risky Review Site Investments originally appeared on Fool.com.

Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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