IAC/InterActiveCorp

IAC Details

IAC/InterActiveCorp (NASDAQ: IAC) operates as 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. 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)

Angi Inc. Offering Online Home Services: On July 13, 2021, Angi Inc. launched 'Angi Key,' a brand new membership service focused on providing homeowners convenient and reliable home maintenance and repair services. Angi Key allows consumers to browse, schedule and buy home services online.

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 was USD 328.90 million vs net loss of USD 330.57 million reported in Q1FY20. The net income for the quarter included a USD 382.54 million unrealized gain (pre-tax) associated with an investment in MGM Resorts International.

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, a substantial chunk of revenue is generated 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 18.30% 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 above its 50 and 200 DMA levels, and its RSI Index is 46.20. We have valued the stock using the Price/Sales Per Share Value-based relative valuation methodology and arrived at a target price of USD 160.68. Considering the correction in the stock price, various accretive revenue segments, and current valuation, we recommend a “Buy” rating on the stock at the current price of USD 135.01, down 0.96% as of July 16, 2021, 1:46 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.