Final Trade Detail
- IAC owns controlling stakes in Match, Tinder, Angie's List, Vimeo and several other digital brands.
- IAC's market cap is less than the value of its stakes in Match Group and ANGI Homeservices.
- The founders of Tinder are suing IAC for $2 Billion. This negative press may weigh on the shares of Match Group and IAC.
It can be difficult to recommend a stock whose value has risen 72% over the past twelve months. The stock is up 27% this month alone. Did we miss our opportunity? Are we buying at the top? Is a pullback inevitable and we should buy the dip? These are all great questions to consider.
In the case of IAC (InterActiveCorp), we’re confident there’s more upside ahead. IAC owns controlling stakes in Match Group (MTCH), ANGI Homeservices (ANGI), Vimeo, DotDash, and many other digital brands. We can take the public valuations of Match and ANGI to determine the value of IAC’s ownership stakes.
Match Group: $14 billion * 81% Ownership Stake = $11.34 Billion Stake
ANGI Homeservices: $10.5 billion * 87% Ownership Stake = $9.13 Billion Stake
Total Public Valuations: $20.47 billion
You’re probably saying to yourself: “Ok, this guy knows basic addition and his multiplication tables. What’s your point?” IAC’s current market capitalization is $16.4 billion, roughly $4 billion less than the value of their stake in Match Group and ANGI. This means shares are trading at a discount before you take into consideration the remaining IAC portfolio.
Although both companies are private, Vimeo and DotDash are rumored to be approaching $100 million annual recurring revenue (ARR). A spin-off of either or both companies could unlock substantial for IAC. There are some underperforming assets in the IAC portfolio, however, many have yet to unlock their full potential and value. For example, revenue from publishing was up 76% in the past quarter, led by DotDash, Dictionary.com and other digital properties.
We do expect IAC to make additional investments in the near future. While there is certainly execution risk, IAC has repeatedly succeeded with acquiring companies like Match Group, Angie’s List, HomeAdvisor, Expedia, LendingTree, TicketMaster, and the list goes on.
Revenue in the most recent quarter was $1.06B (+38.1% Y/Y). EPS of $2.32 also beat estimates by $0.79. There’s a lot to like about IAC and its portfolio of companies. We compute a fair market value of $256/share based on the valuations of Match and ANGI. Anything in addition to Match and ANGI is untapped potential, but something we won’t consider at the moment. We’re leaving ourselves a cushion for execution risk at the ANGI level, as well as a pending lawsuit from Tinder’s founders valued at $2 billion. Our price target is $235, representing 20% upside from the current price.
We recommend accumulating shares between $185 and $200, with a protective stop of $170.