Talk about marketing an IPO! The EverQuote ($EVER) IPO roadshow leaves you with the impression that this is a technology company that have made it easy for consumers to get insurance quotes in an online marketplace and buy coverage online. Their presentation is all about their large technology team and the incredible problem they have solved.

But if you use the service… total junk. After a consumer enters all their information EverQuote simply broadcasts it insurance brokers, companies and agents. This results in the usual avalanche of emails, phone calls and texts. And they are relentless. The home office of EverQuote called about 20 times, in many cases with just a few minutes between attempts.

To make matters worse the companies reaching out have their own data collection systems so all the information that entered in step 1 is lost and must be repeated again. So there is no automation, transparency or even quotes. Even after all the work in most cases there are either no quotes or just examples such as “could be as low as…” which we all know is just a teaser.

Our experience is not unique. There are no easy ways to leave reviews for EverQuote but many consumers have taken the time to report them to consumer watchdog agencies. Here’s a link to the reviews on BBB which are very similar in terms of very negative customer experience.

But we are investors first, consumers second.

We’ve seen these types of companies come public before. The closest direct comparable is TrueCar ($TRUE) which did the exact same thing in cars. After doing your research and clicking a button you were inundated not so much with firm quotes but with the usual “why not come in for a test drive and to talk to a salesman?” Angie’s List ($ANGI) was bad in different ways but another example.

The model is to use data but basically a lure to sell your information to providers and collect a fee in the process. Consumers may not like it but it works well enough to generate returns for the companies paying the fees.

EverQuote provides a nifty diagram to show how it supposed to work even though the reality is they collect your data and blast it out to a bunch of insurance agents who pay for leads.

While $TRUE shares have lagged the S&P consistently over the years the stock has traded in a broad range from $5 to $20 and now hovers in the middle at $10. That gives them a market value of $1B on annual revenues of $300M. It’s not great but it’s not terrible.

Angie’s List ($ANGI) got taken out of their misery by IAC for $500M which again isn’t a very good outcome but underscores that even a lousy company in the space can be worth a meaningful amount of money.

Another terrible one is Trivago ($TRVG) which we wrote about a year ago in our post –  Trivago Feels Scammy when the stock was $18/share. It’s been a disaster since then.

Looking at the Upside

First of all the $EVER IPO is reasonably priced. As shown in the IV below the market cap of $400M at the mid-point is only 3-4x sales and this is a space with a significant opportunity.

EverQuote could also use these proceeds to actually improve their platform in ways that might make consumers not hate it as much which would lead to better, more sustainable growth.

In building our model we dinged them a little on growth and margins because the current offering is unlikely to benefit from any strong “word of mouth” growth – they will have to attract new consumers to the platform to continue to grow.

Still our IV suggests the shares can easily trade at $25/share despite their business methods. Investors should remain price sensitive and keep an eye on this management team since there is a large discrepancy between their stated truths about the company and the truth in the market.



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