IAC Overvalued After Angie's List Buy
IAC maintains a large stake in the newly formed ANGI Homeservices, whose revenue growth and margin expansion targets we're skeptical of.
The acquisition of Angie’s List by
We think such valuation is pricing in ANGI Homeservices hitting its revenue growth and margin expansion targets, while our assumptions are slightly lower. While ANGI Homeservices targets a five-year compound annual growth rate of 20%-25% in 2018-22, we expect slightly lower growth mainly due to a higher assumption of the overlap of the two previous companies’ service professionals. We are also a bit more conservative since such a combination is likely to attract larger players such as Alphabet’s Google or Amazon to the $400 billion home-services market.
Further, given that 90% of the home-services market is offline, we think ANGI Homeservices needs to market and speed up online transition more aggressively. In our view, this could prevent EBITDA margin expansion from hitting 35% by 2021 or 2022, which is what ANGI Homeservices is targeting.
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