Shares of Angi (NASDAQ: ANGI), which provides a digital platform that connects home improvement professionals with potential clients, fell sharply on Wednesday, falling more than 21% in early trade.The stock was down 19.5% as of 12:15 p.m. ET.The company's fourth-quarter earnings report went public after the market closed on Tuesday, sending shares lower.But it takes a little digging to understand why investors are so unhappy.
On top of that, Angi reported a 16% year-over-year increase in the quarter to approximately $416 million.As management happily highlighted, this was the company's fifth consecutive quarter of double-digit revenue growth.The biggest driver was Angi's services division, which saw sales rise 116% year over year.But that requires more explanation -- as management noted, the acquisition of the rooftop business was an important driver of this growth.The services segment accounted for only 15% of total revenue in 2020, so it grew from a relatively small base.(For reference, it now generates 27% of total revenue.) Meanwhile, sales in the company's European division rose just 1%, and sales in its advertising business fell 2%.So revenu e growth is not
At the end of the day, Angi posted a loss of $0.05 per share in the fourth quarter, worse than the $0.03 per share loss in the year-ago quarter.While the company is clearly working to expand its product portfolio, growing revenue coupled with a deteriorating bottom line isn't a good trend.
Angi also released updated business trend information, including information for January 2022.The numbers for service requests, monetization transactions, transaction services professionals, and ad services professionals are relatively weak as the new year approaches.This is not the best update.
Angi has been around for a while, but it's still building out its operations as it looks to find a reliable, profitable business model.At the end of the day, however, the company has yet to prove that it's on a solid path, and investors can react tremendously to both negative and positive news updates.For example, the stock rose in late January on news that Angi was entering into a partnership with big box retailer Walmart.Until Angi's business continues to be profitable, risk-averse investors should probably put their money elsewhere.
