Home repair subscription service Frontdoor (FTDR) posted the highest net income in its history, yet investors sent the stock into a free fall on Thursday.
Yesterday, Frontdoor stock dropped 19.17% to $46.21, marking one of the biggest single-day losses in the company’s history. It went largely sideways in after-hours trading.
The sell-off followed Frontdoor’s year-end report, which revealed a net income of $235 million in 2024—up 37% from the previous year and far exceeding expectations of a decline.
While investors dumped the stock, one analyst remains bullish on Frontdoor. Truist Securities set a price target of $67 for Frontdoor on February 14—more than 30% above Thursday’s close.
The firm based its assessment on card transaction data showing higher revenue from customers. With Frontdoor’s latest earnings out, an updated analyst outlook is expected soon.
What triggered the drop?
Frontdoor's selloff began at the market open on Monday after the year-end report release, and the stock saw little to no recovery throughout the session. One key detail in the report may have raised concerns for traders.
Frontdoor added 170,000 home repair subscription plans between Q3 and Q4 2024—the biggest quarterly increase in company history. That surge came after years of steady declines since 2020.
However, the spike coincided with Frontdoor’s December 19 acquisition of competitor 2-10 Home Buyers Warranty.
“2-10 immediately grows our customer base, revenue, and earnings,” CEO Bill Cobb said at the time of the purchase. “Its New Home Structural Warranty also diversifies Frontdoor’s product portfolio and opens cross-selling opportunities for our home warranties and on-demand services.”
Despite the positive spin, traders may have viewed the sharp rise in earnings and customer plans as artificially boosted by the acquisition rather than organic growth.
Adding to the uncertainty, Frontdoor’s net income for Q4 2024 was flat year-over-year at $9 million. The company also warned that revenue from its home repair services will dip in Q1 2025 due to planned price cuts aimed at boosting sales.
Still, Frontdoor expects full-year 2025 revenue to grow by 10%.
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