Angi Stock: Making Progress Reducing Losses (NASDAQ:ANGI)

When a man tells you that he got rich through hard work, ask him: ‘Whose?”― Don Marquis.

Today, we put Angi Inc. (NASDAQ:ANGI) in the spotlight. The company is the clear market leader in its niche but has struggled to find a way to profitability. It also has destroyed plenty of shareholder value since it came public to much fanfare more than a decade ago. New management is making progress on reducing losses. Are the shares investable yet? An analysis follows below.

Company Overview:

Angi Inc. is headquartered in Denver, CO. The company operates a platform that connects consumers with service professionals for local services via a nationwide online directory of service professionals in various service categories such as plumbing, handymen, and electricians. Angi Inc. is a subsidiary of IAC/InterActiveCorp (IAC). The stock trades around $2.50 a share and sports an approximate market capitalization of $1.25 billion.

Angi’s network consists of more than 200,000 skilled home professionals nationwide. The company has cycled through many iterations and names since originally being founded in 1995. The current version of the company was formed in 2017, when IAC’s HomeAdvisor merged with Angie’s List. The company dominates the Digital Service category, but alas that has not led to consistent profitability.

Here is how the platform works.

Third Quarter Results:

The company posted its Q3 numbers on November 7th. Angi Inc. delivered a GAAP loss of one cent a share, two pennies a share above expectations. Revenues fell just over 25% on a year-over-year basis to $371.8 million, just over $6 million light of the consensus. Management guided about five to ten percent of the sales drop is due to softness in the overall housing market. The rest is due to leadership’s decision to improve the quality of its sales leads and thereby customer satisfaction.

Management guided to an operating loss of between $25 million to $60 million for FY2023. They expect adjusted EBITDA to be positive and in a range of $100 million to $110 million for the fiscal year. Of note, Adjusted EBITDA guidance has improved from where it started in FY2023.

Analyst Commentary And Balance Sheet:

The analyst community is mixed in their views on the company. Since Q3 results were posted, four analyst firms including Goldman Sachs have reissued Buy/Outperform ratings on Angi Inc. stock. Three analyst firms including UBS have maintained Hold/Neutral ratings on the shares.

Just over 11% of the outstanding float in the shares is currently held short. The company’s Chief Technology Officer sold just under $30,000 worth of shares earlier this year. In 2023, insiders sold just less than $200,000 worth of equity collectively. Angi Inc. ended the third quarter with just over $365 million in cash and marketable securities on its balance sheet against approximately $495 million in long-term debt. That is according to the 10-Q the company filed for the third quarter. It has some 14 million shares left to purchase under an existing stock buyback authorization as well.

Verdict:

The company lost 26 cents a share in FY2022 on $1.89 billion. The current analyst firm consensus has the company seeing losses cut to nine cents a share as sales fall to $1.45 billion in FY2023. They project losses of just four cents a share in FY2024 on revenues of $1.4 billion.

I like the concept of the Angi Inc. business model. Unfortunately, the company has gone through a slew of iterations in its long history. It also had significant management turnover (new CEO and CFO) in 2022. ANGI is making progress on the cost front, but at the expense of falling sales. Revenue growth should approach flat in FY2024, and losses are getting towards breakeven. However, given the company’s long and disappointing history from a shareholder perspective, I would like to see Angi firmly in the black before I would consider the shares for an investment.

A fresh set of data points will be available when Angi Inc. reports Q4 2023 results in the first half of February as well.

He who moves not forward, goes backward.”― Johann Wolfgang von Goethe.