Bull of the Day: ANGI Homeservices (ANGI) – October 12, 2018

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ANGI Homeservices Inc. (ANGI Free Report) is the biggest brand in online home services. This Zacks Rank #1 (Strong Buy) is expected to see big growth over the next two years.

ANGI Homeservices connects homeowners to home service professionals through its digital brands including HomeAdvisor and Angie’s List. It operates in 8 countries.

Smooth CEO Transition

On Oct 9, ANGI announced its current CEO, Chris Terrill, was stepping down one year after the merger of Angie’s List with HomeAdvisor. He had been CEO for 7 1/2 years.

The company already announced his successor, the current chief product officer, Brandon Ridenour.

The CEO change will not occur until the end of the year.

Ridenour has worked with Terrill for 10 years so this transition will be a smooth one. Analysts applauded the move, noting that the chief products officer has intimate knowledge of the business’ workings.

Acquisitions Continue

ANGI has been actively acquiring smaller competitors.

On Oct 11, it announced it agreed to acquire New York-based Handy Technologies, an on-demand platform and gig marketplace which connects those looking for household services with pre-screened, independent professionals at a fixed price.

These are smaller types of jobs like hanging pictures on the wall, assembling furniture and the like. They aren’t the bigger home renovations that ANGI has been focusing on. This is a whole new market it hasn’t yet entered.

Terms of the deal were not disclosed.

Handy’s brand resonates with educated, high-income millennials which is a growing market.

The deal is expected to close at the end of October.

Revenue Up Double Digits in Q2

On August 8, ANGI reported its second quarter results and beat the Zacks Consensus by 4 cents reporting earnings of $0.05 versus the consensus of $0.01.

Revenue jumped 17%, if you include Angie’s List, to $296.6 million from $253.3 million. It was driven by 31% growth in Marketplace and 14% growth in Europe.

IAC/InterActive (IAC Free Report) still owns a big chunk of both ANGI and Match Group (MTCH Free Report) . It’s economic interest in ANGI as of Aug 8 was 86.4% while voting interests were 98.5%.

The company had $255.6 million in cash at the end of the quarter with $269.7 million in debt.

Big Earnings Growth

The analysts have been bullish on the combined Angie’s List and HomeAdvisor all year.

The 2018 Zacks Consensus Estimate is calling for $0.12 in 2018 but $0.26 in 2019, a gain of 120.3%.

Now that the merger is completed and synergies have been worked out, the analysts see the company building momentum.

Is the Pullback a Buying Opportunity?

Shares have been on a tear in 2018. They were up as much as 105% on the year before the recent pullback and are now still up 65.3%.

But the pullback has created a buying opportunity for growth investors who missed out in the first go around.

Shares aren’t cheap, with a forward P/E of 59.

But for investors looking to get into one of the hot small cap Internet plays, ANGI Homeservices is one to keep on the short list.

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2018-10-12 10:51:00

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