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ANGI Homeservices Finds Silver Linings During a Challenging Time

By Jeremy Bowman – May 12, 2020 at 11:00AM

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Sales at the home-improvement marketplace plunged as the pandemic hit, but positive signs are starting to appear.

Like much of the country, ANGI Homeservices (ANGI) is looking forward to the economy reopening.

ANGI, which owns home-services sites like HomeAdvisor, Angie's List, and Handy, saw solid growth through the first two months of the year as revenue rose 19% and 21% in January and Feburary, respectively, but activity on the site nosedived once the pandemic hit.

Revenue growth in March slipped to just 1% and the company finished the quarter with 13% top-line growth. The results were enough to lift the stock as the home-services marketplace is now rebounding from the worst of the effects, with sales now growing in most of its categories. 

In an interview, CEO Brandon Ridenour noted a wide range of uncertainty, but saw a number of tailwinds that should help the company overcome the current challenging market. Below are a few areas to look out for.

Two men looking at blueprints over a desk

Image source: Getty Images.

Higher home improvement spending 

One of the clearest effects of stay-at-home orders and social distancing has been that spending on discretionary pleasures like travel, entertainment, and eating out at restaurants has been nearly eliminated thus far during the pandemic. That's left Americans, who have already been spending an unusual amount of time at home, with some extra cash on their hands. If they can't spend it on a vacation or dining out, home improvement projects seem like a good candidate, especially for those in new work-from home situations and who now have the time to tackle certain home improvement projects.  

Ridenour said that demand for outdoor projects and in areas like lawn and garden were up, showing a willingness to spend. He also noted that two-thirds of jobs on the platform were non-discretionary, such as repairs that had to be made, which should continue regardless of the economic climate. Indoor discretionary jobs, like cleaning, on the other hand, were still down by the end of April, showing that virus fears were causing homeowners to be resistant to having strangers in their homes.

Service provider engagement is surging

As a marketplace, ANGI Homeservices needs both supply and demand, and having an adequate number of service providers on the platform is just as important as demand from homeowners. The company has long known that in recessionary climates, service providers, which are almost entirely small businesses, look to the site for jobs as other channels dry up. That's been borne out in recent weeks. ANGI has seen greater engagement on all levels from new service providers coming to the marketplace, better retention, and current customers using the marketplace more.

In fact, the company had record additions for service providers in April, which came even as other service providers suspended operations because of the outbreak. Since the company has historically had a shortage of service providers, those new customers should help drive the company's overall growth as the economy rebounds.

New tech is also improving the platform

To help deal with fears around COVID-19, ANGI introduced contactless payment and video calling, and both technologies should make the service more attractive to service providers and homeowners. Before the pandemic, 60% of payments were done with cash or check. With contactless payment, the company eliminates the risk of transmitting the virus through touch and offers a more convenient, seamless way to handle payments.

Video calling helps by giving service providers a chance to assess a job ahead of time without visiting the home. Allowing video calling not only eliminates the risk of transmitting the virus from person-to-person contact, but also adds a level of convenience and efficiency for service providers, as they can save a trip to a job site. Those features will remain attractive after the pandemic and could drive more conversion among service providers.

What's next

While the future remains uncertain with the risk of a second wave of infections and the economy sinking into a recession, Ridenour did say the company was starting to see a "V-shaped" recovery in demand, but acknowledged a wide range of outcomes over the coming months. The company had pulled back on marketing and is trimming other costs, but will relaunch TV ads soon, taking advantage of a favorable ad market as prices have fallen significantly.

Ridenour said that there may be some correlation between demand for ANGI's services and sales at Home Depot and Lowe's, so investors may want to pay attention to earnings reports and commentary from the two retail giants' further insight into the home-improvement market as they report first-quarter results later this month.

While the months ahead may be challenging for ANGI Homeservices, tech improvements it's making and the increased interest from service providers should help build on its competitive advantages when the economy recovers and the pandemic fades.

 

Jeremy Bowman owns shares of Angie's List, Inc. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Angi Inc. Stock Quote
Angi Inc.
ANGI
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$275.88 (-2.24%) $-6.31
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
LOW
$189.72 (-2.47%) $-4.81

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