Angi Is a Tale of Two Services

The value, like any good home improvement project, could lie in the finishes. A little over two years ago, IAC broached the idea of divesting its 84.6% stake in what was then called ANGI Homeservices. Today, Angi accounts for about half of IAC’s total revenue, and IAC is sticking by it amid a significant rebranding and a new chief executive officer. In a November 2019 shareholder letter, IAC Chief Executive Joey Levin wrote he felt Angi “could benefit from remaining inside IAC for the time being.” Perhaps he worried Angi’s shares wouldn’t be worth much without his help; or maybe he saw a diamond in the rough.

Angi predominantly competes in the $600 billion U.S. home-services market. Those dollars are certainly worth fighting for. But it also makes one wonder if the $1.7 billion in revenue that Wall Street is forecasting for Angi this year signals opportunity or disappointment since what was once Angie’s List was founded more than 25 years ago.

IAC is clearly still holding out hope. The third quarter represented Angi’s fourth consecutive quarter of double-digit revenue growth. Its services business grew 160% year-over-year. But that business is still small—just 25% of Angi’s total revenue as of the third quarter. Ironically, as CEO Oisin Hanrahan said in an interview for this column, the best market for home-services providers is the worst time for Angi’s biggest business: ads. Angi’s ads and leads segment still makes up the majority of its revenue. And, unfortunately, plumbers have no need or desire to advertise amid a labor shortage when they are already booked up.

So where does that leave Angi’s prospects? Mr. Hanrahan said on the company’s third-quarter conference call that its ongoing rebranding efforts would likely bleed into next year. He also said he felt it was more important for the company to focus on best serving its customers today rather than maximizing short-term earnings. Wall Street was disappointed in the company’s most-recent guidance, which called for 15% to 20% revenue growth and just breaking even in terms of profit for the foreseeable future. Despite five consecutive quarters of triple-digit revenue growth for its services segment, Angi’s overall revenue growth has decelerated from 21% in August to 17% in November. Wall Street is looking for the company to return to its 20%-plus revenue growth target over time—a goal Mr. Hanrahan said in early November he shared for the company long term.

Angi is working to be a one-stop digital solution in home services for homeowners and service providers alike. Whereas consumers have previously used online tools to help find providers, Angi is increasingly focused on also helping to ensure consumers can digitally arrange to get all their work completed.

We seem to be at the forefront in an online housing revolution. Even iBuyers like Opendoor and Redfin have been heavily investing in home-services talent and technology to more digitally renovate their own home flips. It is still unclear, though, just how much homeowners and handymen alike want their services digitized and what they will pay.

One cheery fact is that millennials are finally buying homes. The Wall Street Journal reported this week that they now account for more than half of all home-purchase loan applications. As a digitally native generation, Angi’s mission should resonate.

Investors had better hope so.

Write to Laura Forman at laura.forman@wsj.com