On Tuesday, TD (TSX:TD) Cowen maintained a Buy rating on IAC/InterActiveCorp (NASDAQ:IAC) with a steadfast stock price target of $78.00. The firm highlighted IAC as their top Small/Mid-cap (Smidcap) Idea for 2024, pointing out that the company is trading at a significant conglomerate discount.
According to the firm's analysis, IAC's trading multiple is at 2.0x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on their 2025 estimates, excluding ANGI (NASDAQ:ANGI) & equity stakes.
TD Cowen anticipates that the trading multiple could widen as Dotdash Meredith (NYSE:MDP), a division of IAC, is expected to see its digital revenue grow by over 10% year-over-year in the fiscal year 2024 estimates. Moreover, the firm predicts IAC will return to positive free cash flow (FCF). The long-term discounted dividend model (DDM) estimates were slightly increased by the firm, yet the price target was kept unchanged at $78, reinforcing the Buy rating.
The endorsement from TD Cowen comes as IAC, a media and internet company, prepares for growth in its digital media segment. The company's financial performance and strategic positioning are key factors in the firm's positive outlook.
IAC's portfolio includes a range of companies in various sectors, with Dotdash Meredith being a notable entity focused on digital media and publishing. The forecasted growth in digital revenue for Dotdash Meredith is a significant contributor to the firm's overall prospects.
The financial metrics used by TD Cowen to evaluate IAC, such as the EV/EBITDA ratio, serve as indicators of the company's value relative to its earnings potential. The firm's emphasis on IAC's return to positive free cash flow suggests an optimistic view of the company's ability to generate cash after accounting for operating expenses and capital expenditures.
IAC's stock performance will be closely watched by investors as the company aims to capitalize on its digital media growth and improve its financials in line with TD Cowen's expectations.
In other recent news, IAC Inc. has been in the spotlight due to several significant developments. The company's Senior Vice President and Controller, Erik Bradbury, announced his resignation, prompting a search for a new Chief Accounting Officer. This change in the executive team comes as the company continues to navigate a competitive technology landscape.
IAC's subsidiary, ANGI, reported a 13% year-over-year revenue decline, but achieved a 21% year-over-year increase in EBITDA, outperforming Wall Street expectations by 16%. The company has maintained its full-year 2024 EBITDA guidance in the range of $120-150 million.
In analyst updates, TD Cowen reiterated a Buy rating for IAC, following a discussion with IAC's CFO & COO, Chris Halpin. Wells Fargo (NYSE:WFC) raised its price target for IAC, maintaining an Overweight rating, reflecting a positive view of the company's performance and future prospects.
Similarly, KeyBanc also raised its price target on IAC's stock, highlighting the performance of Dotdash Meredith as a key factor in IAC's ongoing turnaround.
The company's recent partnership with OpenAI and the appointment of a new CEO at ANGI were also notable developments. IAC's management has emphasized a strategic focus on share repurchases, investments in core assets, and the exploration of merger and acquisition opportunities. These are recent developments that continue to shape the strategic and financial dynamics at IAC Inc.
InvestingPro Insights
In light of TD Cowen's Buy rating on IAC/InterActiveCorp, examining the company through the lens of InvestingPro data and tips provides additional context for investors. With a market capitalization of $3.99 billion, IAC is currently trading at a negative P/E ratio of -18.28, reflecting the market's anticipation of future earnings recovery despite recent losses.
The company's revenue for the last twelve months as of Q1 2024 stands at $4.21 billion, which, while indicating a decline of -15.69%, is coupled with a strong gross profit margin of 69.8%.
InvestingPro Tips highlight that IAC is trading at a low revenue valuation multiple and possesses liquid assets that exceed its short-term obligations, suggesting a degree of financial stability. Moreover, while analysts predict a sales decline and a drop in net income for the current year, they also forecast the company to return to profitability within the year.
The company does not pay a dividend, which aligns with the focus on reinvesting earnings to fuel growth and recovery. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available that can further inform investment decisions. By using the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where they can explore a total of 7 tips related to IAC for a comprehensive investment strategy.
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