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Brand Face-Off: Angie's List Inc vs. Yelp Inc

Evaluating ANGI and YELP from technical and sentiment viewpoints

by 2/10/2014 11:42:53 AM
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Need a restaurant recommendation or a tip on which mechanic to choose? If you do, then there's a good chance you'll check out what people are saying on business review websites Angie's List Inc (NASDAQ:ANGI) and Yelp Inc (NYSE:YELP). Unfortunately, what you won't be able to find on either site is which company's investment prospects are better. That's the question we'll try to answer in this Brand Face-Off.

For starters, YELP has clearly outperformed ANGI on the charts. During the past six months, while Angie's List has shed 27% to trade at $17.58 -- pressured lower recently by its descending 160-day moving average -- Yelp has advanced over 78% to its perch at $92.46 (and reached a new all-time high of $96.96 earlier today). Helping the latter along the way has been its upward-moving 100-day moving average, as well as this morning's news of a joint venture with Yahoo! Inc. (NASDAQ:YHOO).

Daily Chart of ANGI since July 2013 With 160-Day Moving Average

Daily Chart of YELP since July 2013 With 100-Day Moving Average

On the sentiment front, ANGI boasts a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.22, which is just 6 percentage points shy of an annual acme. However, this is not necessarily a reflection of bullish speculation, given that nearly 32% of the stock's outstanding float is sold short. In other words, the faster-than-usual pace of call buying may be the result of short sellers attempting to hedge their bearish bets.

Meanwhile, YELP's 50-day ISE/CBOE/PHLX call/put volume ratio checks in at 1.80. While this stat reveals that long calls have been purchased to open at nearly twice the rate of long puts in recent months, the ratio ranks in just the 36th percentile of all readings from the last 52 weeks. To put matters simply, option traders have initiated calls at a slower rate than normal over the last 10 weeks, relative to puts.

At the same time, however, despite Yelp Inc's technical tenacity, nearly 14% of its total available float is shorted. If the stock can maintain its upward trajectory, this set-up could lead to contrarian tailwinds, as the shorts may be forced to cover.

On Wall Street, the brokerage bunch is considerably more bullish toward ANGI than YELP. Specifically, Angie's List has received 10 "buy" or better ratings from covering analysts, compared to just four "holds" and not a single "sell" or worse recommendation. What's more, the shares' consensus 12-month price target of $22.97 represents a considerable premium to the equity's current price.

By contrast, while Yelp has received 15 total "buy" and "strong buy" endorsements, it's also been slapped with 10 tepid "holds" -- as well as a price target of $85.96. This leaves the door wide open for a potential round of analyst upgrades and/or price-target hikes.

Summing things up, Yelp Inc (NYSE:YELP) is the clear winner of this battle. Not only is the stock technically stronger than Angie's List Inc (NASDAQ:ANGI), but it also is plagued by a higher degree of pessimism. From a contrarian perspective, it's this unwarranted skepticism that may yield more room for YELP to run higher, as the doubters capitulate to the security's enduring outperformance.

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