Why Angie's List (ANGI) is Rallying on Friday

NEW YORK (TheStreet) -- Two days after plunging on a Bank of America downgrade, Angie's List  (ANGI) rallied on news a hedge fund had taken a 5.5% stake.

By market close, shares of the handyman search engine climbed 4.2% to $17.47.

In a SEC filing, hedge fund JAT Capital, founded and run by John Thaler, said it had taken a 5.5% stake or 3.2 million shares.

On Wednesday, Bank of America downgraded Angie's List to "neutral" from "buy" with a $22 price target, causing shares to tumble 8.7%. The downgrade was due to Street EBITDA estimates too high for the company. Prior to the downgrade, shares were up 24% for the year. Analyst Paul Bieber expects the stock to fall after fourth-quarter results come in as forecast.

"We estimate 2014 EBITDA of $10.8 million vs. the Street at $21.2 million, and we estimate 2015 EBITDA of $37.2 million vs. the Street at $64.5 million," Bieber wrote in the report. "The company is improving profitability at a pace of $25-30 million a year, and the Street seems to be modeling an accelerating pace."

Angie's List is due to report fourth-quarter and full-year earnings Wednesday Feb. 12.

Analysts surveyed by Thomson Reuters expect net income for the December-ended quarter of 13 cents a share on $68.50 million in revenue. Full-year consensus is for a per-share loss of 48 cents on sales of $245.37 million.

Also See: Why Angie's List (ANGI) Was Downgraded

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