Frontdoor is a category-leading, asset-light home-services compounder whose pricing power, recurring renewals, HVAC expansion, and buybacks support attractive long-term upside despite claims-cost and regulatory risks.
Overview
Frontdoor, Inc. is the U.S. category leader in home service plans, operating American Home Shield, regional brands, and 2-10 HBW across all 50 states. Its subscription model covers up to 29 home systems and appliances, with Renewals providing 74.3% of Q2 revenue and retention of 79.6%. The company also sells DTC and Real Estate first-year plans and is expanding non-warranty offerings, particularly HVAC replacement. Q2 2026 revenue rose 5.0% to $645 million, gross profit increased to $378 million at a 59.0% margin, Adjusted EBITDA rose 10.5% to $220 million, and Adjusted EPS increased 18.4% to $1.93 versus $1.76 consensus. Management raised FY2026 guidance to $2.19 billion-$2.21 billion of revenue and $585 million-$600 million of Adjusted EBITDA, with approximately 27% EBITDA margin and $30 million of capex. **The core investment case is recurring, asset-light cash generation paired with pricing power and a scale moat.** At $83.50, the stock trades at 16.8x FY2026E EPS, below the 17.5x peer average. Catalysts include HVAC scaling, 2-10 HBW distribution, housing recovery, and approximately $330 million of planned buybacks.