IAC/InterActiveCorp: 'A Successful Past With A Brighter Future'

Online content company IAC/InterActiveCorp IAC reported strong fourth-quarter results, despite a mixed quarter from Match Group Inc MTCH, highlighting more stabilization and increasing contribution from HomeAdvisor and video.

Match, HomeAdvisor And Video

IAC owns an 86 percent economic stake in Match. IAC considered somewhat Match-dependent as Match accounts for the largest portion of EBITDA. But, the strong performance from HomeAdvisor and improving video numbers shows there remains significant value for IAC, excluding Match.

HomeAdvisor’s revenue up 35 percent to $123.7 million, while the large user base of 240 million Video viewers is starting to bear fruit, with the core SaaS business ending 2016 with 768,000 subscribers, up 14 percent year-over-year.

“While we acknowledge that IAC will continue to remain somewhat Match-dependent, we believe that the sustained growth in Video and HomeAdvisor has finally started to put an increased focus on the core story,” Benchmark analyst Daniel Kurnos wrote in a note.

“Excluding Match, IAC has an enterprise value of $1.2 billion, or 12x the high-end of 2017 HomeAdvisor EBITDA guidance alone, reflecting free optionality and significant value potential,” Kurnos continued.

The analyst noted that HomeAdvisor’s leading tech platform will scale nicely with higher-capability SPs, driving volume and pricing, apart from the potential margin benefits seen from international organic expansion.

On the video front, Kurnos still bets big on the back-end OTT market, with the top 10 channels growing 20 percent sequentially. But, he is also positive on the prospects of Vimeo’s potential launch of a subscription video service in conjunction with the existing Lions Gate partnership.

Looking Ahead: Rating, Price Target

For 2017, Kurnos expects total revenue growth of 1 percent, or 7 percent on a PF basis excluding ShoeBuy, with EBITDA growing 26 percent, primarily driven by Match and HomeAdvisor.

Kurnos reiterated his Buy rating and raised his price target by $5 to $95.

At last check, shares of IAC were up 2.10 percent to $74.37 after setting a new 52-week high of $74.96.