Disclosure: I am long shares of ANGI
I have taken a slightly different approach in this month’s deep dive. Given the length of my deep dives, I have outlined six different sections to help readers navigate and know beforehand what to expect.
Here are the sections below, and a short brief on what I have discussed in each of these sections.
Section 1 ANGI Economics: In this section, I have mentioned the portfolio of brands ANGI owns and elaborate on the TAM of the marketplace, including discussion related to marketplace economics from consumer, Service Professional (SP), and ANGI’s perspective as well as ANGI’s advertising business.
Section 2 How the business model is changing and why it makes much more sense: I have discussed why market penetration of online homeservices is likely higher than we think, why the old model was perhaps flawed, and the fixed price model solves many of the problems ANGI has faced.
Section 3 Bear arguments, and mitigants (if any): I have touched upon some arguments bears highlight against ANGI: capacity constraints of Service Professionals (SP), disintermediation risk, intensifying competition, and the Google threat.
Section 4 Valuation model, and what it implies: I have explained why the reverse DCF indicates that the bar is pretty low for ANGI to generate a decent return for its shareholders.
Section 5 Management incentives: Management’s comp and target operating metrics are discussed in this section and what this means for ANGI shareholders.
Section 6 Final words: Parting words on ANGI, and discussion on weight of ANGI on my portfolio. Finally, I will have a short discussion on my other personal portfolio holdings to frame ANGI’s weight in perspective.