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.

As the war against Hamas dragged into 2024, there were worries here that investment would dry up in Israel’s globally important technology sector, as much of the world became angry against the casualties in Gaza and recoiled at the unstable security situation.

In fact, a new survey found investment into Israeli technology startups grew 28% last year to $10.6 billion. The influx buoyed Israel’s economy and helped it maintain a war footing on several battlefronts.

The increase marks a turnaround for Israeli startups, which had experienced a decline in investments in 2023 to $8.3 billion, a drop blamed in part on an effort to overhaul the country’s judicial system and the initial shock of the Hamas-led Oct. 7, 2023 attack.

Tech investment in Israel remains depressed from years past. It is still just a third of the almost $30 billion in private investments raised in 2021, a peak after which Israel followed the U.S. into a funding market downturn.

Any increase in Israeli technology investment defied expectations though. The sector is responsible for 20% of Israel’s gross domestic product and about 10% of employment. It contributed directly to 2.2% of GDP growth in the first three quarters of the year, according to Startup Nation Central—without which Israel would have been on a negative growth trend, it said.

“If you asked me a year before if I expected those numbers, I wouldn’t have,” said Avi Hasson, head of Startup Nation Central, the Tel Aviv-based nonprofit that tracks tech investments and released the investment survey.

Israel’s tech sector is among the world’s largest technology hubs, especially for startups. It has remained one of the most stable parts of the Israeli economy during the 15-month long war, which has taxed the economy and slashed expectations for growth to a mere 0.5% in 2024.

Industry investors and analysts say the war stifled what could have been even stronger growth. The survey didn’t break out how much of 2024’s investment came from foreign sources and local funders.

“We have an extremely innovative and dynamic high tech sector which is still holding on,” said Karnit Flug, a former governor of the Bank of Israel and now a senior fellow at the Jerusalem-based Israel Democracy Institute, a think tank. “It has recovered somewhat since the start of the war, but not as much as one would hope.”

At the war’s outset, tens of thousands of Israel’s nearly 400,000 tech employees were called into reserve service and companies scrambled to realign operations as rockets from Gaza and Lebanon pounded the country. Even as operations normalized, foreign airlines overwhelmingly cut service to Israel, spooking investors and making it harder for Israelis to reach their customers abroad.

An explosion in negative global sentiment toward Israel introduced a new form of risk in doing business with Israeli companies. Global ratings firms lowered Israel’s credit rating over uncertainty caused by the war.

Israel’s government flooded money into the economy to stabilize it shortly after war broke out in October 2023. That expansionary fiscal policy, economists say, stemmed what was an initial economic contraction in the war’s first quarter and helped Israel regain its footing, but is now resulting in expected tax increases to foot the bill.

The 2024 boost was led by investments into Israeli cybersecurity companies, which captured about 40% of all private capital raised, despite representing only 7% of Israeli tech companies. Many of Israel’s tech workers have served in advanced military-technology units, where they can gain experience building products. Israeli tech products are sometimes tested on the battlefield. These factors have led to its cybersecurity companies being dominant in the global market, industry experts said.

The number of Israeli defense-tech companies active throughout 2024 doubled, although they contributed to a much smaller percentage of the overall growth in investments. This included some startups which pivoted to the area amid a surge in global demand spurred by the war in Ukraine and at home in Israel. Funding raised by Israeli defense-tech companies grew to $165 million in 2024, from $19 million the previous year.

“The fact that things are literally battlefield proven, and both the understanding of the customer as well as the ability to put it into use and to accelerate the progress of those technologies, is something that is unique to Israel,” said Hasson.

This Tech Company Could Be The Next Uber

Its stock looks too cheap.

The 28% increase buoyed the country as it battled on several fronts but investment remains down from 2021