Airtasker: Paying up for potential greatness

About the author:

Anthony Porto
Author name:
By Anthony Porto
Job title:
Senior Analyst
Date posted:
03 May 2021, 3:30 PM
Sectors Covered:
Online, Emerging Tech

  • The Airtasker (ASX:ART) business model is highly attractive. A product that ‘works’ for both sides of the marketplace, attractive unit dynamics with healthy gross and contribution margins, an enormous TAM in the infancy of e-commerce adoption, and a large international expansion opportunity provide a long growth runway.
  • After a period of some irrational exuberance, we believe ART has now settled into a trading range whereby this business model attractiveness is balanced with the risks of increased competition and the fledgling nature of international expansion.
  • We see the current share price as reflecting our base case, but note significant upside potential if ART can replicate domestic success internationally.
  • We initiate coverage with a Hold rating and price target (login to view); we are however mindful we may be destined to become the team that initiated on a great Australian success story at a Hold.

On their way to becoming a verb – introducing Airtasker

Founded in 2011, Airtasker is Australia’s leading e-commerce platform for the provision of local services. The Airtasker platform is all-encompassing, facilitating the entire task (ex the physical act) on the platform.

ART has reached over 1m customers since inception, with over $1.15bn of tasks being facilitated domestically. Airtasker has built the domestic marketplace over the past decade and is on track (in our opinion) to becoming the marketplace of choice for local services.

Opportunity is large and mainly nascent at present, strong adoption of e-commerce in labour services a key driver

ART commands a ~27bps share of the ~A$55bn domestic local services market, with online penetration of this market likely well below that for products. Continued local services growth ahead of household expenditure growth, increased penetration of ecommerce and ART continuing to expand the range of services offered, provide powerful tailwinds.

International expansion sees a more than 11-fold increase in the total addressable market (TAM). Replication of the domestic business internationally would see shareholders well rewarded, noting our upside valuation case represents ~3.4x the current share price.

Model economics drive attractive margins and cashflow at scale

With 93%+ gross margins, 80%+ GPAPA margins and ~70% contribution margins, the ART business model should produce highly attractive returns at scale. The positive working capital model and utility of capex spend across geographies should also provide for high levels of cashflow generation.

Highly attracted to the ART business. Current pricing sees us initiate on a Hold.

Despite being highly attracted to the ART business model and growth potential, a doubling of the share price since IPO has us sitting on the fence.

Whilst we believe long-term holders will be rewarded for backing the fledgling international expansion opportunity, we see the current price as providing a balance between the opportunity of long-term gains and the risk of international expansion taking longer and costing more than anticipated.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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