Angi: Too Cheap As Growth Is Set To Inflect Higher (Rating Upgrade)

Angi Inc. (NASDAQ:ANGI) shares have recently declined by approximately 25%, despite an initial positive market reaction to its Q2 earnings report. An analyst has upgraded the stock from Hold to Buy, citing management's strategic decision to shed lower-quality revenue, which has helped maintain earnings, and projecting a return to mid-single-digit growth and margin expansion for the company next year. The analyst views the stock as undervalued at 7x free cash flow compared to its peers.

Analysis

Angi Inc. (NASDAQ:ANGI) shares have experienced a significant 25% decline over the past month, despite an initial favorable market response to its Q2 earnings release. This recent sell-off has prompted an analyst to upgrade ANGI from a 'Hold' to a 'Buy' rating, signaling a contrarian view on the stock's current valuation.

The analyst's bullish stance is rooted in Angi's strategic decision to intentionally shed lower-quality revenue, which has successfully maintained earnings despite a considerable reduction in overall revenue. This operational pivot is expected to drive a return to mid-single-digit growth and margin expansion next year.

Valuation is a key factor in the upgrade, with the stock currently trading at an attractive 7x free cash flow, deemed "too cheap" when benchmarked against relevant industry peers. The analyst's beneficial long position in IAC, Angi's parent company, provides additional context to this conviction.

Key Decisions for Investors

• Investors should evaluate the recent 25% share price decline in Angi Inc. as a potential entry point, aligning with the analyst's upgrade to 'Buy'.
• Consider the long-term implications of Angi's strategic shift to shed lower-quality revenue, which is projected to drive mid-single-digit growth and margin expansion next year.
• Assess the current valuation of 7x free cash flow against industry peers, as the analyst views the stock as significantly undervalued.