This Tech Company Could Be The Next Uber

Technology has managed to replace business trips, visits to the gym, and in-person shopping. But for anyone who has dealt with a leaky faucet or overgrown tree, the Covid era has been another reminder: Good help is hard to find.

Angi (ticker: ANGI) has spent the past 25 years trying to solve the problem. For most of that time, the company used internet ads to match homeowners with prescreened plumbers, carpenters, and landscapers. It was a decent business, but the model stalled during the pandemic. Overworked contractors, faced with overwhelming demand, have had little need to pay for advertising.

Revenue for Angi’s ads and leads business, which is about three-quarters of company revenue, was flat in the latest quarter, even as demand for contractors surged. The company’s stock is down 33% over the past 12 months. But Angi is working on a fix and—in a world of pricey internet stocks—the stock now looks like a bargain.

Angi, which stems from the 2017 merger of Angie’s List and HomeAdvisor, has begun to take a more active role in the relationship between homeowners and contractors. While the company historically left the scene after making an introduction, its new Angi Services segment serves as a soup-to-nuts marketplace. All communication, scheduling, and billing between homeowner and contractor take place via Angi’s platform. Angi gets an undisclosed percentage of each job.

There are more than 500 available services, including plumbing, landscaping, painting, roofing, remodelling, housecleaning, and pest control. Contractors get the benefit of guaranteed jobs at fixed rates, with Angi handling bill collections. Meanwhile, homeowners can easily book appointments via the web or mobile app.

If it sounds like calling a car via Uber or booking a vacation house on Airbnb, that’s part of the plan.

“It’s hard to own a home,” says Angi CEO Oisin Hanrahan. “We want to serve every need a homeowner has and take some of that stress away, while changing the economics” for home-services providers.

While still small, the Angi Services segment is already showing impressive growth, with revenue up 160% year over year in the third quarter, to $117 million.

There’s significant upside from there. Americans spend nearly $600 billion annually on home services. Less than 20% of those jobs begin online, a figure that should quickly increase as a new digitally native generation enters the housing market.

Wall Street analysts expect Angi to report 2021 revenue of $1.68 billion, up a modest 15% from the prior year. That should accelerate as Angi Services becomes more dominant and the legacy business returns to growth.

J.P. Morgan analyst Cory Carpenter expects Angi Services to make up more than 40% of the company’s total revenue by 2025. He sees it growing more than 50% in 2022, versus single-digit growth in the ads and leads business.

“For an investor, it checks a lot of boxes: a large total addressable market, low online penetration, and leading market share,” says Carpenter, who rates Angi stock at the equivalent of Buy.

So far, investors aren’t paying attention. Angi stock trades for just 1.8 times the $2.29 billion in revenue that Wall Street expects the company to generate in 2023. That compares with Angi’s five-year average of more than five times year-ahead revenue. Leading online marketplaces like Airbnb (ABNB), Etsy (ETSY), and Uber Technologies (UBER) fetch an average multiple of 6.1.

Some of Angi’s discount is justified, given its slower projected growth than peers. The company is targeting 15% to 20% annual growth in the coming years.

Large profits aren’t imminent, either. The ongoing rebrand to Angi requires heavy investment spending, as does building out Angi Services in more categories and geographies. Angi is projected to lose $66 million in 2023, before turning profitable on a net income basis in 2024. Hanrahan says he’s comfortable with operating the business at break-even for several years, prioritizing long-term growth over near-term profits. The good news is that Angi has little debt and generates positive cash flow, meaning it should be able to self-finance that growth.

IAC/InterActiveCorp (IAC), the Barry Diller–controlled technology start-up holding company, owns some 85% of Angi shares.

“We see a really great opportunity to build this business into what could be an 800-pound gorilla in the home-services space,” says Lori Keith, portfolio manager of the $8.3 billion Parnassus Mid Cap fund (PARMX), which is Angi’s largest non-IAC shareholder. “You have to take a long-term view as they invest…to achieve greater scale, and then see the [profit] margin inflection down the road.”

Angi doesn’t need an Airbnb-like multiple to deliver significant returns.

Carpenter uses an undemanding sales multiple of three times to come up with a price target of $13 on Angi shares, 58% upside from a recent $8.21.

Like countless other areas of the 21st-century economy, booking home services will increasingly move online. With Angi, investors will have to be patient. But they now have an opportunity to get in on the ground floor.

Four in five Australians say they have changed their investment and savings goals over the past 12 months, with 44 percent doing so primarily to make ends meet during the cost–of–living crisis. A further 25 percent say they’ve switched strategies to protect their wealth against inflation, according to a new survey by financial advisory firm, Findex.

The Superannuation and Retirement Insights report shows Australians have also changed their goals to grow their wealth (31 percent), to create a regular income stream (29 percent) and to reduce taxes (17 percent). Transferring wealth to their children or other family members has motivated 10 percent of Australians to alter their investment plans, which is likely reflective of the increasing role played by the Bank of Mum and Dad in young people’s first home purchases.

The report found that traditional investment avenues, such as property and superannuation, remain the most popular choices, with more than eight out of 10 survey respondents ranking these asset classes highly. But there is also an increasing inclination towards investments that offer the potential for quicker returns, additional perceived safety, and better liquidity or accessibility to funds.

Eighty percent of survey respondents also nominated bank savings as among their top five investment choices right now, followed by shares (66 percent) and cash (51 percent).

“This shift reflects a broader strategy to mitigate current financial uncertainties, balancing the pursuit of long-term wealth accumulation with the need for immediate financial security,” the report says.

While superannuation is considered a cornerstone investment for retirement and long-term wealth accumulation, 85 percent of Australians are exploring investments outside superannuation. The most common investments outside super are bank savings (64 percent), property (38 percent), cash (35 percent) and shares (34 percent).

However, when the data is broken down by generation, stark differences are revealed in how each age cohort chooses to invest their spare income and why.

Most popular investments outsider super and the motivations to invest by generation

Baby Boomers (born 1965-1964)

Outside superannuation, Baby Boomers prefer to invest in bank savings (60 percent), property (50 percent) and shares (46 percent).

By far, their primary motivation for investing is planning for retirement (80 percent). They also want to build wealth (51 percent) and support their children or other family members (25 percent). Other motivations include preserving wealth to beat inflation (22 percent) and paying off a mortgage or other debt (20 percent). They are the least likely generation to be saving for an investment property.

Gen Xers (born 1965–1980)

Gex Xers prefer to invest in bank savings (57 percent), property (43 percent) and shares (36 percent).

They are motivated to invest for retirement (66 percent), to build wealth (50 percent), to save for emergencies (36 percent), and to pay off a mortgage or other debt (30 percent). Interestingly, Gen X is the generation most concerned with supporting their children or family members (33 percent). This may be because Gen Xers have grown up during Australia’s long-standing property boom that began in the late 1990s and continues today.

Millennials (born 1981-1996)

Millennials have the strongest interest in bank savings as an investment avenue (70 percent), followed by property at 41 percent. They also like cash (35 percent) and shares (33 percent). Millennials have the highest uptake of exchange-traded funds (ETFs) at 21 percent. ETFs are a relatively new type of asset class, with the first ones trading on the ASX in 2001. ETFs are a basket of shares that can be purchased in a single transaction for instant diversification. Millennials are also the generation most interested in cryptocurrencies, with 22 percent invested.

Their biggest motivations for investing are to build wealth (55 percent), save for emergencies (50 percent) and plan for retirement (49 percent). They also want to support their kids (32 percent) and pay off their mortgage (32 percent). Millennials are the generation most likely to be saving for an investment property (28 percent) rather than a first home (17 percent).

Gen Zs (born 1997-2009)

Gen Zs spread their money across more asset classes than their elders. They like investing in bank savings (66 percent), cash (42 percent), shares (22 percent), ETFs (17 percent), property (14 percent) and cryptocurrencies (13 percent).

While Gen Zs are the youngest age cohort within the survey, they also have long-term goals just like their elders. The biggest motivation to invest among Gen Zs is to build wealth (52 percent). More Gen Zs are saving for a first home than any other generation, with 42 percent pursuing this goal. They are also the generation most concerned with preserving wealth to beat inflation (29 percent). Gen Zs also want short-term security, with 46 percent saving for emergencies. They’re also the generation most likely to be saving for other major purchases like a car or holiday (41 percent) and investing just for enjoyment (26 percent).