3Q Results Overshadowed as IAC/InterActive (IACI) Issues Concerns over Google (GOOG) Contract; Needham & Company Cuts Price Target to $76
Needham & Company reiterated a Buy rating on IAC/InterActiveCorp (NASDAQ: IACI), and cut the price target to $76.00 (from $86.00), following the company's 3Q15 earnings results. While Search revenue and EBITDA were modestly above expectations, the attention is likely to be on IAC’s renewal of its Google (NASDAQ: GOOG) contract. Analyst Kerry Rice believes that the changes are significant, and that Google’s new AdSense policies, could reduce revenue.
Rice commented, "While 3Q15 results were above expectations on a revenue and adjusted EBITDA basis, we are disappointed with the outlook for IAC. The two primary factors are the reduced revenue opportunities in Search and Applications due to the renewed Google contract and several headwinds that are likely to modestly slow revenue for the Match Group. On the positive side, the Premier Publishing business (part of Search), HomeAdvisor, and Vimeo continue to exhibit solid growth. We are reducing our revenue and EBITDA estimates for Search and Applications and Match Group, but the expected contribution from the Plentyoffish acquisition, cash inflow from the Match Group IPO, and increase in our HomeAdvisor valuation lifts our sum-ofthe-parts valuation for FY16. Therefore, we are maintaining our BUY rating."
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Shares of IAC/InterActiveCorp closed at $67.57 yesterday.