On Wednesday, TD Cowen adjusted its price target for IAC/InterActiveCorp (NASDAQ:IAC) shares, reducing it to $77 from the previous $82, while continuing to endorse the stock with a Buy rating. The adjustment follows the company's third-quarter revenue report, which slightly surpassed estimates, thanks to better-than-expected performance in its Search, Dotdash, and Emerging segments, with Angi's results meeting predictions.
The company's EBITDA for the quarter was reported to be 10% higher than consensus, driven by strong results from the Emerging businesses and Angi. In response to the earnings, management discussed the potential spin-off of ANGI, which would leave Dotdash Meredith (NYSE:MDP) and MGM Resorts (NYSE:MGM) as IAC's primary segments.
In light of the recent earnings report and management's commentary, TD Cowen revised its estimates and sum-of-the-parts price target to the new $77 figure while reiterating a Buy stance on the company's stock. The analyst believes that the current market reaction is likely a reflection of the anticipated volatility for ANGI in the first half of 2025.
IAC's management also provided a more precise EBITDA guidance for 2024, prompting the analyst to adjust their estimates accordingly. This narrowed guidance and the potential corporate restructuring with ANGI are key factors influencing the firm's assessment and price target revision. Despite the reduction in the price target, the firm's outlook on IAC/InterActiveCorp remains positive.
In other recent news, IAC and its subsidiary Angi Inc. have detailed a strategic growth plan in their Third Quarter 2024 Earnings Conference Call. This includes a planned spin-off of Angi, anticipated to enhance profitability and sharpen focus on customer experience. The companies reported a 16% growth in digital revenue and a 26% increase in advertising revenue for IAC, with the Care segment showing significant growth with $365 million in revenue.
The companies also highlighted a 30% increase in job completion rates at Angi, improvements in customer satisfaction, and a focus on operational efficiencies. IAC, which holds a significant stake in MGM valued just below $1.3 billion, plans to utilize net operating losses to offset potential taxable gains.
Among the recent developments, the integration of OpenAI into the D/Cipher ad-tech tool is expected to drive growth and enhance monetization capabilities. However, upcoming SEC regulatory changes may cause revenue volatility for Angi, and a broad slowdown in digital advertising was observed. Despite these potential challenges, the companies remain optimistic about future growth and innovation.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on IAC/InterActiveCorp's financial position and market performance. The company's market capitalization stands at $4.1 billion, with a price-to-book ratio of 0.68 as of the last twelve months ending Q2 2024, suggesting the stock may be undervalued relative to its book value.
InvestingPro Tips highlight that IAC's stock has taken a significant hit over the last week, with a 9.54% decline in price total return. This recent downturn aligns with TD Cowen's observation of market volatility, particularly concerning ANGI's prospects. Additionally, IAC operates with a moderate level of debt, which could provide financial flexibility as the company considers potential restructuring moves, including the ANGI spin-off mentioned in the article.
It's worth noting that IAC's revenue for the last twelve months ending Q2 2024 was $4.05 billion, with a revenue growth rate of -14.64%. This decline in revenue is consistent with another InvestingPro Tip indicating that analysts anticipate a sales decline in the current year. Despite these challenges, IAC maintains a strong gross profit margin of 70.71%, which could be a positive factor as the company navigates through its restructuring plans.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for IAC, providing a deeper understanding of the company's financial health and market position.
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