IAC/InteractiveCorp. (IACI) released earnings before the bell on Wednesday, July 30th, and despite disappointing results bounced +4.70%, closing at $69.90. In what may have been a relief rally, investors finally got a peek at how much damage the recent Supreme Court ruling against Aereo caused IACI, which owns a number of internet and technology products ranging from dating website Match.com to Investopedia, as well as a recently announced purchase of The Princeton Review, a test prep company.
All in, IACI disclosed a $66.6m writedown resulting from investments in Aereo and 4 other ventures, and this resulted in a loss of $18m for Q2 2014 compared to $58.3m profit in Q2 2013. As noted by the Financial Times, this was IACI's first quarterly loss since 2010. Wall Street was projecting an EPS of 0.82 per share and revenue of $792.6m, so the reported EPS of 0.79 and revenue $765.30 were well within the margin of the lost 66.6m--perhaps fueling Wednesday's rally. In fact, the collective who supply the crowd-sourced tool Estimize.com were looking for 0.84 and $802.49m, which again would have presumably been a beat without the writedown.
Due to these special one-time circumstances, IACI may be in good position to disprove the Yahoo assertion:
"When a company misses the Estimize consensus more often than not the stock price declines over the next 3 days, regardless of how the company performs relative to the Wall Street consensus."
Of course, IACI is not quite out of those woods just yet but if Wednesday is any indication, IACI may be moving higher.
I have been a fan of IACI for quite some time, and formerly held shares that I regretfully had to part with due to cash flow need. With a PEG of 1.82, IACI remains on my screen as a potential re-buy in the future. Analysts are generally positive with a Recommended Consensus score of 2.4. The dividend is a bit lower than I would like, coming in at 1.44%. The gross margin is a very healthy 68.4% and sporting a consensus target price of $74.53 implies a 6.2% increase from current levels. I am personally looking for a return to at least the 52-week high of $80.64 (an implied 13.32% increase) if the strong results from Match Group, HomeAdvisor and Vimeo continue. I would expect to see an increase in the consensus target price shortly if IACI extends much higher.
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