ANGI Homeservices Has Room To Grow In $700B Market, BMO Capital Markets Says In Bullish Initiation

ANGI Homeservices Inc. ANGI, formed in the merger of IAC's global HomeAdvisor business and Angie's List, is a clear market leader in the home services space, according to BMO Capital Markets.

The Analyst

Analyst Daniel Salmon initiated coverage on the shares of ANGI Homeservices with an Outperform rating and $16 price target.

The Thesis

ANGI Homeservices, with a 5.5-percent market share, has ample room to grow in a $700-billion total addressable market, Salmon said in a Tuesday note. (See the analyst's track record here.) 

"We believe the marketplace will continue to shift online as millennials become homeowners and, on the supply side, as service professionals adopt the reach, trackable return and tailored customer management solutions inherent in an online marketplace," the analyst said. 

BMO expects ANGI to reach its adjusted EBITDA target of $270 million in 2018 and $409 million in 2019, thanks to identified cost synergies and strong revenue growth opportunities.

"We believe a 20-25-percent adjusted EBITDA growth CAGR is reasonable into the early part of the next decade," Salmon said.

Due to ANGI Homeservices monetizing Angie's List traffic on Jan. 1, 2018 through HomeAdvisor, the analyst estimates Marketplace Service Requests will begin to ramp in the second half of 2018. Marketplace service professionals will also begin ramping longer-term, he said. 

The Price Action

ANGI shares have added more than 100 percent since the announcement of the merger agreement between Angie's List and IAC's HomeAdvisor unit. ANGI shares were up 1.91 percent at $13.31 at the time of publication Tuesday. 

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