Needham & Company Raises PT for IAC (IACI) on Sum of the Parts

Needham & Company analyst, Kerry Rice, raised his IAC/InterActiveCorp (NASDAQ: IACI) price target to $78 (from $76) on higher HomeAdvisor and Vimeo valuations that better reflect their public comps. Based on his analysis, he believes, there is minimal downside to IAC's shares at current levels.

The impact from the Match Group IPO is modest; therefore, their previous valuation is essentially unchanged. Despite raising valuation estimates, they believe Tinder and HomeAdvisor still offer upside optionality. They believe Tinder's valuation is likely discounted given the delays in monetization and the potential combination of HomeAdvisor and Angie's List could unlock additional value.

Reducing FY16 Search and Applications EBITDA estimates to better reflect the negative impact of the reduced revenue levels caused by the Google contract renewal.. The new contract terms integrate Google’s new AdSense policies, the opt-in requirements for application downloads, and lower mobile monetization levels, all of which should reduce revenue. Approximately 85% of Search and Applications revenue was derived from Google; therefore the impact is likely significant.

On a standalone basis, the Match Group is valued at $3.5B and carries $1.3B in debt and $50M in cash. IAC still owns ~86% of the Match Group and will consolidate the business. They estimate the overall impact to IAC is the additional debt of ~$134M from previous estimate.

No change to Buy rating.

For an analyst ratings summary and ratings history on IAC/InterActiveCorp click here. For more ratings news on IAC/InterActiveCorp click here.

Shares of IAC/InterActiveCorp closed at $62.26 yesterday.

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