Home services digital marketplace ANGI Homeservices (NASDAQ:ANGI) stock has squeezed higher on its most recent Q4 2020 earnings. The platforms connect consumers with service professionals and independent contractors for various home service projects ranging from cleaning and handyman services to home repair, renovation, and improvement projects.
The pandemic has sparked a housing boom as consumers migrate out of clustered cities to the refuge of suburbia. The work-from-home trend has further accelerated the demand for home improvement services and single-family homes. As the economic recovery continues to accelerate, companies have discovered that remote work will be a cornerstone of the new normal. Prudent investors seeking exposure in the home improvement segment can watch for opportunistic pullback levels in shares of ANGI.
Q4 FY 2020 Earnings Release
On Feb. 3, 2021, ANGI released its fiscal fourth-quarter 2020 results for the quarter ending December 2020. The Company reported an earnings-per-share (EPS) loss of (-$0.03) excluding non-recurring items versus consensus analyst estimates for a profit of $0.02, a (-$0.05) miss. Revenues grew 11.8% year-over-year (YoY) to $359.3 million beating analyst estimates for $357.17 million. The Company saw Marketplace growth of 15%, which was bolstered by its pre-priced services initiative. The Company also bought back 1.2 million shares at an average price of $11.86 between Nov. 6, 2020 and Feb. 2, 2021.
Conference Call Takeaways
ANGI CEO, Biden Ridenour, provided color on the quarter and year. Ridenour noted that small business spending is still down from pre-pandemic levels but rebounding. The Company expanded its sales force by 30%. He also noted:
“We’re very happy with the benefits of fixed price delivered throughout Q4. When you look at the sort of modest acceleration in the overall business, most of that is a credit to the growth in fixed price… it had a nice counter-seasonal effect where it’s really quite strong in Q4 relative to the normal seasonal patterns of our traditional business.”
Fixed price revenues came in ahead of targets at $160 million, but the Company is in the “early innings” with over 200 projects in the pipeline.
Fixed-Pricing Model
The upfront pricing model works for companies like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) since rides are not that cost-intensive. A fixed price model for cleaning jobs and small handyman services also work well under this structure. The problem arises on more complex services like the home renovation or improvement projects. With the many moving parts and materials costs involved, contractors can end up on the short end of the stick especially when projects come in over budget (which happens often). While buyers love the idea, the service suppliers can get caught with thinner margins or even losses under this model. Pundits could argue that it demands efficiency on the part of the contractors, but the restrictive nature could easily deter contractors as demand can be found on other platforms. Time will tell if this model works for larger projects, which will determine the future profitability for ANGI as the Company has yet to turn a profit. Currently, fixed-pricing accounts for only 5% of the top line but is growing.
Thin(er) Float
It’s important to keep in mind that ANGI was a spinoff from IAC Interactive (NASDAQ:IAC). IAC still owns nearly 87% of the company (diamond hands), resulting in a much thinner float than appears. As of Jan. 15, 2021, the short interest was 28% of the float (16 million of 73.5 million float). This figure will be updated by mid-February. The short-squeeze technicals are outlined in the next section when bulls triggered a pretzel mini pup. The Q4 2020 earnings were not earth-shattering by any means which warrants patience for prudent investors seeking exposure only on opportunistic pullbacks.
ANGI Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provide a broader view of the price action playing field for ANGI stock. The monthly rifle chart has a pup breakout with a rising 5-period moving average (MA) support at the $13.23 Fibonacci (fib) level. The monthly stochastic triggered a pretzel mini pup which is stronger than a traditional mini pup. This is because the stochastic initially crosses down, which tricks the bears into piling in on the shorts in anticipation of a deeper price drop, only to have the stochastic sharply cross back up triggering a short squeeze. This squeeze formed on the daily market structure low (MSL) buy trigger above $13.84. The weekly rifle chart indicates a pup breakout with its 5-period MA deeply lagging at the $13.23 fib overlapping with the monthly 5-period MA. It’s rare to have both the monthly and weekly 5-period MA overlap with each other. This further illustrates how hard the short-sellers were caught off guard. Prudent investors seeking exposure can monitor opportunistic pullback levels at the $14.77 fib, $13.94 fib, $13.23 monthly/weekly 5-period MA/fib, $12.41 fib and the $12.06 fib. The upside trajectories range from $18.55 up to the $25.36 level.