IAC/InterActiveCorp

IAC Details

IAC/InterActiveCorp (NASDAQ: IAC) is a digital media and internet holding company that "builds companies". It holds majority ownership in and operates various public companies worldwide and currently generates revenue from 4 segments, viz. 1) Angi Inc., engaged in connecting home service professionals with consumers, 2) Dotdash, a digital publishing brand portfolio providing information on select vertical content categories, 3) Search, comprising a cluster of websites offering general search services and direct-to-consumer downloadable desktop applications, and 4) Emerging & Other, which includes Care.com, Mosaic Group, Bluecrew, etc.

IAC Portfolio (Source: Investor Presentation, June 09, 2021)

Care.com Expands Service Portfolio: On July 12, 2021, Care.com, a leading digital care services provider, announced the expansion of its enterprise services via new partnerships. Effective July 2021, Care.com has made available CollegeVine (which offers virtual guidance for high schoolers) services to its clients with existing LifeCare services subscriptions. In another collaboration with Talkspace, a digital virtual behavioral healthcare provider, all of Care.com's enterprise clients have access to stand-alone mental health offerings from Talkspace.

Business Spin-Off: On December 22, 2020, IAC announced its plan to spin-off its entire shareholding in Vimeo and created a subsidiary SpinCo (Vimeo Holdings, Inc.), for the purpose. Upon completion, the Vimeo business was transferred to SpinCo, which became a separate publicly-traded company called Vimeo, Inc. The transaction closed on May 25, 2021.

Q1FY21 Results: During Q1FY21 (ended March 31, 2021), the company registered a growth of 28.05% YoY in total revenue to USD 875.99 million vs. USD 684.12 million in Q1FY20, with sales generated by Angi Inc. representing 44.18% of the total revenue. Net income for Q1FY21, including a USD 382.54 million unrealized gain (pre-tax) associated with an investment in MGM Resorts International, was USD 329.13 million vs. a net loss of USD 328.20 million reported in Q1FY20. The company exited the quarter with a cash balance (including short-term investments) of USD 3.92 billion, with total debt of USD 705.99 million.

Key Risks: IAC relies on search engines to drive traffic to its various revenue-generating websites, and some of these search engine operators also offer competing products and services. Hence, if the search engines fail to prominently display the company's website links in search results, it could directly affect IAC's business. Moreover, IAC generates a substantial chunk of revenue from online advertising (Dotdash and Search segments), and decreased advertising expenditures or levels of confidence in consumers and discretionary spending could be detrimental to IAC's business.

Valuation Methodology: Price/Sales Per Share Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

IAC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IAC stock declined 15.86% in the past three months and is currently close to the mid-point of the 52-week range of USD 74.52 to USD 179.12. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 37.72. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD XYZ. Considering the correction in the stock price, diversified revenue segments, robust balance sheet, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 134.38, down 2.23% as of August 03, 2021, 1:24 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

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