Angi is a story of two services

Value, like any good home improvement project, can lie in the finish. More than two years ago, IAC cherish the idea of ​​divestment Its 84.6% stake in what was then known as ANGI Homeservices. Today, Angi accounts for about half of IAC’s total revenue, and IAC is sticking with it amid a dramatically renewed brand name and a new chief executive. In a letter to shareholders in November 2019, IAC CEO Joey Levin wrote that he felt Angi “could benefit from staying at IAC for the time being”. Perhaps he worries Angi’s stock wouldn’t be worth much without his help; Or maybe he saw a diamond in the rough.

Angi primarily competes in the US$600 billion home services market. Those dollars are definitely worth the fight. But it also makes one wonder if the $1.7 billion in revenue Wall Street is forecasting for Angi this year signals opportunity or disappointment since the former Angie’s List was founded more than 25 years ago.

The IAC is clearly still holding out hope. The third quarter marked Angi’s fourth consecutive quarter of double-digit revenue growth. Its services business grew 160% year over year. But that business is still small — accounting for just 25% of Angi’s total revenue as of the third quarter. Ironically, as CEO Oisin Hanrahan said in an interview for this column, the best market for home service providers is the worst time for Angi’s biggest business. : advertisement. The advertising and lead segment still makes up the bulk of Angi’s revenue. And, unfortunately, plumbers have no need or desire to advertise amid a labor shortage once they’ve been booked.

So what is the cause of Angi’s prospects? Hanrahan said during the company’s third-quarter conference call that the company’s ongoing rebranding efforts are likely to fall apart next year. He also said he feels it’s more important for the company to focus on best serving customers today rather than maximizing short-term earnings. Wall Street has been disappointed in the company’s most recent guidance, which calls for revenue growth of 15% to 20% and only breakeven on profits in the near future. Despite five straight quarters of triple-digit revenue growth for its services business, Angi’s overall revenue growth decelerated from 21% in August to 17% in November. Wall Street is looking to the company is back to its goal of more than 20% revenue growth over time — a goal Mr. Hanrahan said in early November that he has shared with the company over the long term.

Angi is working to become a one-stop digital solution in home services for homeowners as well as service providers. While consumers have traditionally used online tools to help find suppliers, Angi is increasingly focused on helping ensure consumers can make digital arrangements to complete all of their work. surname.

We seem to be at the forefront of the online housing revolution. Even iBuyers buyers like Opendoor and Redfin have invested heavily in home service talent and technology to more digitally renovate their homes. However, it is still unclear how much homeowners and crafters want to digitize their services and how much they will have to pay.

The good news is that millennials are finally buying a home. The Wall Street Journal reported this week that now they account for more than half of all home loan applications. As a digital native generation, Angi’s mission should resonate.

Investors have better hope than that.

Write letter for Laura Forman at laura.forman@wsj.com