ANGI Homeservices Inc. on Thursday reported third-quarter earnings and wrapped up a year-long merger process, meeting or beating analyst expectations in the process.
Now, with a new CEO at the helm, the online home-services marketplace is thinking bigger. For investors willing to go along for the ride, Brandon Ridenour is setting his sights on revolutionizing home repair and renovations in the same way that Jeff Bezos reshaped retail.
ANGI Homeservices ANGI, -5.98% is a marriage of Angie’s List, the subscription and review-oriented directory of service providers, and HomeAdvisor, an online marketplace matching customers to those independent contractors.
The merged company has seen service requests in the third quarter rise 28% as compared with a year before, to 6.4 million, the company said in its earnings release. The challenge has been finding the supply — enough plumbers, plasterers, gardeners, flooring experts and so on — to meet demand. ANGI has leveraged big data and its online platform to address that challenge, by offering service providers access to jobs they may not be known for, for example.
The company’s supply-demand dynamic invites comparisons to Uber, which leverages an online platform to match in-need riders with available drivers.
But Ridenour appears to believe ANGI’s potential is much bigger than that. Only about 10% of U.S. home-services providers operate online, according to an ANGI estimate. That means 90% of the industry is ripe for conversion. And with millennials — “digital natives,” Ridenour noted — becoming homeowners in droves, it’s a perfect match, not just for one-offs like a clogged sink, but as an overall shift in how Americans care for their homes.
In fact, Ridenour and departing CEO Chris Terrill, who led Match.com MTCH, -7.17% in its early days, see uncanny parallels between the early days of online dating and the current moment in ANGI’s life cycle. Early online daters were trying something new, and untested, and were often reluctant to talk about it, Terrill said. Now, a decade or so later, it’s practically the norm.
In the same way, a younger generation of homeowners who have never received an Angie’s List mail solicitation or thumbed through the Yellow Pages could help drag an offline, word-of-mouth based industry into the cloud.
(Both ANGI and Match are part of IAC IAC, -5.80% , which controls 98% of the voting interest in ANGI.)
Analysts are largely impressed. “The growth in capacity and improvement in capacity utilization are showing just how much value they bring into the ANGI ecosystem,” wrote Wedbush analysts Friday, with revenue-per-service-provider growth of 14% in the third quarter, up from 7% in the second quarter and 3% in the first quarter. “That means ANGI is bringing on higher-quality service providers that spend more on the platform as they have the capability to service more customers.”
Wedbush has an outperform rating on the stock, and, while the firm cut its price target in anticipation of the company spending more to grow and improve its platform, the current 12-month price target of $24 suggests 35% upside.
Raymond James analysts took the same approach, keeping an outperform rating on the stock but cutting the price target to $23 from $25. “ANGI’s 2017 [earnings] goal of $270 million initially faced investor skepticism,” they wrote. “Yet management delivered on its goal while driving revenue outperformance. Having demonstrated the margin potential, management believes it is prudent to reinvest organically and via M&A (i.e. the Handy acquisition) to drive the next phase of growth in a $400 billion total addressable market.”
For Ridenour, the “next phase” is just one step toward his long-term vision. “I see us doing what Amazon did, restructuring an entire segment of the economy,” he told MarketWatch.
ANGI shares fell nearly 6% on Friday but have still gained over 60% this year.
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