Shares of Angi (NASDAQ: ANGI), which provides a digital platform that connects home improvement professionals with potential customers, fell sharply on Wednesday, down by more than 21% at one point during morning trading. As of 12:15 p.m. ET, the stock was down by 19.5%. The drop was precipitated by the company’s fourth-quarter earnings report, which hit the market after the close on Tuesday. But it requires a little bit of digging to understand why investors were so displeased.
On the top line, Angi reported a year-over-year gain of 16% to roughly $416 million in the quarter. It was, as management was pleased to highlight, the company’s fifth consecutive quarter of double-digit percentage revenue growth. The big driver was Angi’s services division, which increased sales by a massive 116% year over year. But that needs a bit more explanation — as management notes, the acquisition of a roofing business was a material driver of that increase. And the services division only made up 15% of the top line in 2020, so it was growing from a relatively small base. (For reference, it now generates 27% of total revenues.) Meanwhile, sales in the company’s European division were up by just 1%, with its advertising business seeing a sales decline of 2%. So the top-line growth wasn’t really as impressive as it might appear once you look past the headline figures.
On the bottom line, Angi lost $0.05 per share in the fourth quarter, a worse result than its $0.03 per share loss in the prior-year period. A growing top line combined with a worsening bottom line isn’t exactly a great trend, even though the company is clearly working to build out its portfolio of offerings.
Angi also released updated business trend information, including for January 2022. The numbers were relatively weak across service requests, monetized transactions, transacting service professionals, and advertising service professionals as the new year got underway. It was not the best update.
Angi has been around for a while, but it’s still building its operation as it looks to find a reliably profitable business model. However, at the end of the day, the company still hasn’t proven it is on a solid path, and investors can react dramatically to news updates both negative and positive. For example, the stock rallied in late January on news that Angi was entering a partnership with giant retailer Walmart. Risk-averse investors should probably put their money elsewhere until Angi’s business is consistently profitable.
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