Thread by @nsheth12

Why I think $ANGI could be a $70bn+ company in 10 years (vs. ~$7.5bn today). Long thread below 👇

In short, it's fixed price, fixed price, fixed price.

1/ First, some context.

Angi is the clear leader in home services. Nobody else is even close. And it’s a really hard market to get into - you have to (1) onboard hundreds of thousands of SPs, many of whom are not very tech-savvy and (2) build demand from millions of customers

2/ Reminds me of $SFIX in some ways - massive TAM and they are the clear leader, but it’s super hard to get the details right & experience to be great - which means they've penetrated TAM slower than expected.

At the same time, it's really hard for new entrants to come in.

3/ My bet is that over the next decade, Angi will be able to fix some of its supply-side issues (primarily w/ fixed price), which will enable it to penetrate much more of its TAM.

This will create a massive business.

3/ Let's put some numbers to this bull case, starting w/ traditional biz.

Say GTV from trad. expands from $20bn to $25bn over next decade (2.5% CAGR), take rate improves to 10%, and EBITDA margin expands to 35% like they’ve guided.

That’s $2.5bn in net revs and $875m in EBITDA.

4/ Now onto fixed price (FP).

In the bull case, let’s say that FP grows like a weed and matches traditional in size, all within the next decade (it is a materially better experience for customers and SPs, after all). That’s $25bn in GTV.

5/ FP’s take rate is “several times” traditional - let’s say it is 18% vs. current ~6.5%. That’s $4.5bn in net revs.

Since take rate is much higher, let’s say 50% EBITDA margin on net revs is possible at-scale. That’s $2.25bn in EBITDA.

6/ Together, that’s $3.1bn in EBITDA and $50bn in GTV in a decade.

Remember, TAM is $400bn+ - so there would still be a ton of growth left. If ANGI can get that far, they have a good shot at capturing some of the remaining TAM, so a 20x EBITDA multiple would be deserved.

7/ That's a $62bn EV. Add in FCF generated in interim and you get to a $70bn+ valuation in a decade - almost a 10x from current levels.

8/ But FP is not the only way to win.

Maybe traditional re-accelerates like they say it will w/ the larger sales force. Maybe payments work. Maybe subscriptions work. All are possibilities.

9/ What I like about Angi is that it is an asymmetric bet. There are multiple ways to win - the largest is FP, but there are others too.

10/ But what are the risks?

11/

1) Angi team fails to execute on the FP opportunity.

Investors are rightfully worried b/c execution has been Angi's biggest issue.

At the same time, the previous team scaled FP from 0 to $160m in 1.5 years, during a global pandemic. They clearly did something right.

12/ And as I’ve explained in a previous thread, I’m even more optimistic on the new team led by Oisin. They’ve re-org’d the biz to focus on FP & are more scrappy and entrepreneurial.

Glenn (IAC CFO) also recently sounded v. optimistic.

13/

2) FP cannibalizes traditional biz.

This will probably happen to some degree. Don’t see how it wouldn’t, given FP is a better experience. Good thing is that FP’s profitability will be a lot higher than traditional, so even cannibalization is a net positive for the biz.

14/ Say FP totally cannibalizes traditional, so that FP does $30bn in GTV and traditional does 0.

If FP’s take rate on GTV is 18% and EBITDA margin on net revs is 50%, that’s $2.7bn in EBITDA from FP alone. Clearly, investment would still work out.

15/

3) Google/FB will kill Angi.

This is a super operationally intensive biz. It’s not like G Flights vs. $EXPE where Google can just grab flight data from scraping/airline APIs.

To get SPs on the platform, you literally have to call them, one by one. Most are not tech savvy

16/ This kind of operational intensity is not in Google’s DNA. I worked there, and I can tell you that nobody there wants to spend their time calling plumbers to convince them to join a platform.

I can't think of one operationally intensive biz that Google/FB have succeeded in.

17/ Plus, even if they did, my projections are that Angi is a high $XXbn company in a decade - not enough to move the needle for Google.

18/

4) People will just do this offline to avoid Angi’s take.

This ties w/ execution risk - key will be making product so seamless that SPs & customers would rather just pay the take than deal w/ phone tag and hassle. As w/ execution risk, I'm optimistic on Oisin & team.

19/ Overall, I like the risk-reward on Angi over the next decade. Heads, I make 10x or more. Tails, I lose 1x.