IAC/Interactive Upgraded by Lehman, Citi on 2008 Outlook

IAC/Interactive (IACI), which Wednesday gained ground on a well-received third quarter earnings report, is higher again Thursday after analysts at both Lehman and Citigroup raised their ratings on the stock.

Lehman’s Douglas Anmuth went to an Overweight rating, from Equal Weight, and kept his price target at $35. He says the company’s third quarter results demonstrated “stabilization” in the company’s largest businesses, HSN and Ticketmaster, with “promising upside” at Ask.com. Anmuth sees a return to double-digit EBITDA growth in 2008.

Anmuth sees several potential catalysts for the stock in the months ahead.

For one thing, he expects an announcement before year-end of a new search engine advertising deal for Ask.com. Anmuth says a new sponsored search deal with Google (GOOG), Yahoo (YHOO) or Microsoft (MSFT) could be worth $2 billion over three years.

He also sees the potential for some structural moves. One possibility would be the monetization of the company’s 30% stake in Japan-based Jupiter Shop Channel; he thinks IAC’s stake could be worth more than $500 million after taxes. Another possibility: a stepped up share repurchase program, funded from its $1.8 billion in cash and marketable securities. A more radical option would be a leveraged recap, with the company taking on debt to buy back a larger percentage of it shares. And finally, he thinks the company could eventually swap HSN and potentially other assets to Liberty Media (LINTA) in exchange for Liberty’s 24% stake in IAC.

Citigroup’s Mark Mahaney raised his rating on the stock Thursday to Buy from Hold, citing indications that the worse is behind the company. In particular he noted the 5% rise in revenue at HSN and the 13% growth at Ticketmaster. Mahaney also cited a new search engine deal for Ask and the potential sale of HSN to Liberty as coming catalysts for the stock. Mahaney raised his target price on the shares to $37 from $35.

IAC/Interactive Thursday is up 75 cents, or 2.6%, to $30.21.