On Wednesday, KeyBanc Capital Markets revised its price target for ANGI HomeServices (NASDAQ: ANGI), reducing it to $2.00 from the previous $3.00. Despite the adjustment, the firm maintained an Overweight rating on the stock. The adjustment follows the recent news from IAC's earnings report on November 11, where it was revealed that the company is contemplating a spinoff of its approximately 85% stake in ANGI to IAC shareholders.
The analyst from KeyBanc noted that although ANGI is not being spun off from a completely strong position—highlighting that profit margins have improved but revenue growth remains a challenge—the move is anticipated to streamline IAC. This strategic change is expected to allow IAC to concentrate more effectively on its other operations, including Dotdash Meredith (NYSE:MDP), Care.com, and its ownership interests in companies like MGM and Turo.
In addition to the new price target for ANGI HomeServices, KeyBanc also adjusted the price target for IAC, setting it at $60, a decrease from the prior target. This change reflects the analyst's view that the turnaround for ANGI might take longer than initially expected.
The report emphasizes that despite the reduction in price targets for both IAC and ANGI HomeServices, KeyBanc continues to see the inherent value in the stocks, as reflected by the maintained Overweight ratings. This suggests that the analyst believes the stocks will outperform the average returns of the stocks that the analyst covers over the next 12 to 18 months.
The potential spinoff of ANGI from IAC is seen as a strategic move to declutter IAC's portfolio and provide a clearer focus on its remaining assets. The analyst’s comments indicate a belief that this could benefit both entities in the long run.
In other recent news, ANGI Homeservices (NASDAQ:ANGI) has been in focus due to a potential spin-off from IAC, its parent company that currently holds approximately 85% ownership. This development was announced alongside ANGI's third-quarter results, which revealed a consolidated revenue drop of over 15%, despite a resilient international segment, particularly in Europe, showing a 15% year-over-year revenue increase. RBC Capital Markets, Citi, and Goldman Sachs (NYSE:GS) have all adjusted their outlook on ANGI Homeservices, with RBC and Citi reducing their stock price targets and Goldman Sachs downgrading the company's stock from Buy to Neutral.
These adjustments reflect concerns about ANGI HomeServices' ability to reverse a trend of declining revenues and the extended timeline required for the company's growth initiatives to bear fruit. The potential spin-off by IAC is being viewed as a move that might impact ANGI's financial performance, and the market will continue to watch ANGI HomeServices' strategic decisions.
InvestingPro Insights
To complement KeyBanc's analysis, InvestingPro data offers additional insights into ANGI HomeServices' financial position. Despite the challenges noted by KeyBanc, ANGI's financials show some positive indicators. The company's P/E ratio (adjusted) stands at 24.76, which is relatively low compared to its PEG ratio of 0.18, suggesting potential undervaluation relative to its growth prospects.
InvestingPro Tips highlight that ANGI's net income is expected to grow this year, and the company has been profitable over the last twelve months. This aligns with KeyBanc's maintained Overweight rating, indicating potential for future performance improvement. However, it's worth noting that analysts anticipate a sales decline in the current year, which corroborates KeyBanc's observation about revenue growth challenges.
The stock's recent performance has been volatile, with a 22.66% decline in the past month. This volatility may explain KeyBanc's decision to lower the price target. Nevertheless, ANGI operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide some financial stability during its turnaround efforts.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 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.