Needham's Checks Suggest Angi Homeservices Faces Growing Competition From Google

First-hand checks with 33 service providers (SPs) who operate (or used to operate) on ANGI Homeservices Inc ANGI suggest competition from Alphabet Inc GOOG's Google is intensifying, according to Needham.

The Analyst

Needham's Brad Erickson maintains a Buy rating on Angi Homeservices with a price target lowered from $23 to $20.

The Thesis

Needham's first-hand checks included conversations with 22 SPs currently on the HomeAdvisor platform along with 11 others who left the platform over the past year, Erickson wrote in a note. The main takeaway was "incrementally negative" for the company versus prior checks for four key reasons:

1. Churn was higher compared to prior conversations which may be related to SPs having a more favorable opinion or increased spend on Google.
2. Google's conversion rates were in some cases equal to HomeAdvisor's.
3. The process of obtaining credits for bad leads is easier at Google.
4. Google boasts a superior reputation in terms of storing data versus smaller platforms like HomeAdvisor.

Despite multiple concerning takeaways from checks with SPs, the bullish case for the stock remains unchanged. Specifically, shares of Angi HomeAdvisor continues to trade at a valuation which reflects an inaccurate belief it has trouble generated sufficient traffic to its platform. Management has several options at its disposal to improve the perception and the analyst wrote he is "hopeful" new deals can be announced.

Price Action

Shares of Angi Homeservices closed Tuesday down 5% at $13.65 and hit a new 52-week low of $13.47.

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