Revisiting ANGI
Questions That I’d Like to Ask ANGI Bulls
ANGI Homeservices (NASDAQ: ANGI) continues to entice investors who think that the home services market is the next big online marketplace opportunity and that ANGI is poised to shine when that happens. I have no position either way in the stock, but like many investors, I’m fascinated by the company and its business strategy because if a company can figure this out, the potential returns are enormous.
As I wrote in July, ANGI has a plumber problem. The problem as I laid it out, is that the supply of skilled professionals is tight and due to age and the lack of new people entering “the trades,” the supply is getting tighter. ANGI hasn’t had a problem with demand (homeowners would love a simple solution to their home service needs). The problem is with convincing service professionals to join the platform and agree to whatever compensation ANGI is proposing. As I wrote before this is where ANGI has troubles that they have yet to find the solution to.
And the latest data shows this. Marketplace service requests are through the roof, but service professional growth and monetized transactions are quite pedestrian.
Andrew Rangeley with Rangeley Capital (Andrew Rangeley Twitter Feed) writes a wonderful blog called Yet Another Value Blog. I recommend you read it. He came out with the bull case today and graciously included my skeptical post on ANGI. Here is the link: Getting the flywheel spinning at $ANGI.
And Patrick O’Shaughnessy recently interviewed FinTwit legend “Modest Proposal” on his incredible podcast Invest Like the Best (Modest Proposal Interview). You should definitely follow Modest Proposal on Twitter (Modest Proposal Twitter Feed), who also made bullish comments on ANGI.
These guys are smart, and I respect their analyses. And I want to continue the conversation through this post and pose some questions to them:
1. If ANGI cannot fulfill the requests they are receiving now with slack in the economy and in employment, what makes you think they will be able to bring on service professionals as the economy and construction restarts?
2. One of the largest plumbing equipment companies estimates that the number of licensed plumbers will fall from over 500,000 current licensed plumbers to around 350,000 in the next five to seven years. How do you see that affecting ANGI’s ability to respond to plumbing service calls or their “take rate” from plumbing professionals?
3. How would you respond to this tweet?
4. Why do you think skilled service professionals use ANGI? In my experience, they use it for “slack” or for purposes that are not to the long-term benefit of homeowners.
5. If you had a widget that needed to be installed in every ANGI homeowners’ home and it required a skilled service professional, do you think ANGI could do it on a large scale with somewhat uniform service and price? (My personal opinion is that ANGI wouldn’t be able to fulfill this need based on my experience being an investor and the Chief Strategy Officer of a smart plumbing device company.)
I value opposing opinions and would love to be proven wrong. But by focusing on what homeowners desire and not on what service professionals want and need, ANGI is simply solving the wrong problem. This is probably because the home service problem is really hard to solve.
I have my own opinions of how this could work, but none of it is easy. Pricing from home service skilled professionals are going up and may start to soar. Homeowners and ANGI are staring this down and the future does not look bullish. Unless that is, you are a young plumber.
And this is why I’m bullish on Lincoln Educational Services (Retraining America), technical schools and community colleges. We need to add hundreds of thousands if not millions of skilled professionals to the workforce. Whatever companies can help solve this problem have a very bright future ahead.