On Wednesday, Goldman Sachs (NYSE:GS) revised its stance on ANGI HomeServices (NASDAQ: ANGI), downgrading the stock from Buy to Neutral and adjusting the price target to $2.50 from the previous $3.25. This change reflects the investment firm's concerns over the company's ongoing revenue challenges and uncertain timeline for achieving positive revenue growth.
The downgrade comes amid ANGI's reported operational turnaround efforts, which management believes will bear fruit in 2026 and beyond. While there are some positive signs, such as a 14% year-over-year increase in six-month professional retention and a 60% improvement in homeowner Net Promoter Score, these have not been sufficient to counterbalance the overall decline in revenue.
ANGI's international segment, particularly in Europe, has displayed resilience with a 15% year-over-year revenue increase and nearly 15% adjusted EBITDA margins. However, the company's consolidated revenue dropped by over 15% year-over-year in the third quarter. This decline is expected to persist into the fourth quarter of 2024 and the first quarter of 2025.
The revenue decrease is attributed to contractions on both sides of the marketplace. Monetized transactions fell by 7% year-over-year, and the number of transacting professionals saw a 12% decline year-over-year in the third quarter. Despite these challenges, ANGI is placing a stronger emphasis on connecting quality demand with qualified service providers.
In other recent news, IAC/InterActiveCorp (NASDAQ:IAC) has been in the spotlight due to its consideration of a strategic spin-off of its profitable subsidiary, Angi Inc. This plan, which would mark IAC's first such move in four years, comes amid a 26% increase in the company's digital advertising revenues and a significant stake in MGM, with 64.7 million shares valued just below $1.3 billion. However, the company also reported a 7% decline in performance marketing.
In terms of future outlook, IAC/InterActiveCorp expects a revenue decline in early 2025 due to new FCC (BME:FCC) regulations but anticipates sequential growth afterward. The company is also optimistic about leveraging OpenAI technology to enhance advertising capabilities and sees a strategic pivot towards long-term investments in customer experience and digital capabilities.
Analysts from various firms have noted the company's focus on streamlining operations post-Angi spin-off and its potential for growth in digital advertising revenue, driven by a 25% growth in D/Cipher campaigns.
However, they also point out a potential slowdown in advertising spending and a decline in the service pro base due to a focus on low profitability acquisitions. These are some of the recent developments that investors should consider when looking at IAC/InterActiveCorp.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on ANGI HomeServices' financial situation, providing context to Goldman Sachs' downgrade. The company's market capitalization stands at $959.73 million, reflecting the market's current valuation of the firm amidst its challenges.
Despite the revenue decline noted in the article, InvestingPro data shows that ANGI's gross profit margin remains robust at 95.22% for the last twelve months as of Q3 2024. This suggests that while the company is facing top-line pressure, it maintains strong pricing power or cost efficiency in its core operations.
InvestingPro Tips highlight that ANGI is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.18. This could indicate potential undervaluation if the company manages to reverse its revenue decline. Additionally, analysts anticipate that net income is expected to grow this year, which may provide some optimism for investors looking beyond the current revenue challenges.
It's worth noting that ANGI's stock has taken a significant hit recently, with a 23.72% decline over the past week and a 24.9% drop over the last month. This aligns with the article's discussion of the company's ongoing struggles and the recent downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for ANGI HomeServices, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.