ANGI Homeservices: A Compelling Long

Summary

• ANGI Homeservices is an underappreciated, undervalued company trading at a significant discount to intrinsic value, public comps, and private market valuations.
• Several months after IAC's spinoff of Match Group, there still remains non-fundamental pressure on ANGI's stock price from IAC focused short sellers, and this will be alleviated in the medium term.
• Given the incredibly large and difficult-to-capture home-services market, ANGI's experienced management and ties to IAC bode well for its ability to execute on this opportunity.

As ANGI Homeservices Inc. (NASDAQ:ANGI) shifts to a true marketplace model, favorable consumer trends - coupled with an increased take-rate - will sustain strong revenue growth and create significant shareholder value.

Company Overview & Business Model

ANGI sits in the middle of the on-demand economy, the wave of millennial homeownership, and the trend towards Flywheel-type, two-sided networks. ANGI provides two-sided marketplaces, primarily in North America, that connect consumers looking for home services such as plumbing and electrical work with Service Providers (SPs) such as handymen, plumbers, and other contractors. ANGI's business can be broken up into two segments: full-fledged marketplaces and lead-generating services. Under full-fledged marketplaces, ANGI operates two main brands: HomeAdvisor and Handy.

HomeAdvisor creates a digital marketplace service that connects consumers with service professionals nationwide for longer-term home repair, maintenance and improvement projects. Consumers are responsible for booking the service and paying the service professional directly. To facilitate booking, HomeAdvisor employs an "instant booking" tool where consumers put time on contractors schedules. Though the platform is free for consumers, HomeAdvisor SPs traditionally pay fees for consumer matches and membership subscription fees for HomeAdvisor memberships and related mHelpDesk products and services.

Handy allows consumers to request services for smaller-term projects and pay for such services directly through the Handy platform; Handy fulfills the request with independently established home service providers.

As for its lead-generating line of business, ANGI operates Angie's List, which connects consumers with SPs for local services through a nationwide online directory. Consumers register and search for a professional service and are reached out to by an SP. Notably, certified SPs are among the first service providers listed in directory search results. To obtain certification, an SP must 1) purchase term-based advertising from ANGI and 2) fulfill the necessary requirements to join the ANGI platform.

Between its

Analyst’s Disclosure: I am/we are long ANGI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.