shares of body According to data from S&P Global Market Intelligence (ANGI -2.88%) fell as much as 13.4% this week. Majority owned home repair and contractor market IAKreported strong quarterly earnings but pointed to disappointing business trends for the quarter ahead. At the close on Thursday, August 11th, the stock is down 13.2% this week.
Angie’s reported second quarter earnings after closing on August 9th. Revenue was $515.8 million, up 23% year over year, with a net loss of $0.05 per share. That’s better than analyst consensus estimates, which reported revenue of $50.5 million and a loss of $0.06 per share. Angie’s traded well in the second quarter, which usually means investors will be bidding on the stock in the days following earnings. However, this did not happen.
So why did Angie’s stock fall the next trading day? It all depends on the data the company provides for July, a month after the end of the second quarter. In July, overall sales growth fell to 10% year over year. That’s significantly worse than the 27% and 24% year-over-year growth the company experienced in June and May. With the economy slowing, the potential need for home repairs and fewer contractors, demand for Angie’s market dwindles.
Angie also needs to grow as she is currently unprofitable. Free cash flow trailing 12 months was a negative $142.6 million as the company invested heavily in its direct services business. It needs to continue generating higher revenue (which it didn’t do in July) to generate positive free cash flow.
Angie stock currently trades with a market cap of $2.5 billion. Revenue of about $1.9 billion and slightly negative earnings per share are expected in 2022. With the stock down nearly 50% year over year, now could be a good time to buy shares of the stock if you believe in the home improvement and contractor market model over the long term. The stock is cheap and can deliver solid returns over the next few years, although it’s much riskier than other stocks as the business is still unprofitable.
Brett Schaefer holds positions at IAC/InterActiveCorp. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.