Angi’s stock price has taken a beating over the past six months, shedding 39.9% of its value and falling to $4.96 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Angi, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Angi Not Exciting?
Even with the cheaper entry price, we don’t have much confidence in Angi. Here are three reasons you should be careful with ANGI, plus one stock we’d rather own.
1. Declining Service Requests Reflect Product Weakness
As a gig economy marketplace, Angi generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Angi struggled with new customer acquisition over the last two years as its service requests have declined by 17.1% annually. This performance isn’t ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Angi wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Angi’s revenue to drop by 5.3%. it’s hard to get excited about a company that is struggling with demand.
3. Poor Marketing Efficiency Drains Profits
Consumer internet businesses like Angi grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).
It’s expensive for Angi to acquire new users as the company has spent 56.1% of its gross profit on sales and marketing expenses over the last year. This inefficiency indicates that Angi’s product offering can be easily replicated and that it must continue investing to maintain an acceptable growth trajectory.
Final Judgment
Angi isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 3.8× forward EV/EBITDA (or $4.96 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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