Angi trades at $14.05 and has moved in lockstep with the market. Its shares have returned 19.6% over the last six months while the S&P 500 has gained 22.9%.
Is there a buying opportunity in Angi, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.
Why Is Angi Not Exciting?
We're swiping left on Angi for now. Here are three reasons you should be careful with ANGI and a 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 22.5% annually to 4.56 million in the latest quarter. 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 2.1%. 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 52.6% 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’s business quality ultimately falls short of our standards. That said, the stock currently trades at 4.6× forward EV/EBITDA (or $14.05 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d suggest looking at one of our all-time favorite software stocks.
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