The media and Internet company, which owns brands such as About.com and Match Group (MTCH), is being valued at an estimated $1.1 billion, while Barclays analysts project the company's intrinsic value at $2.4 billion.
"While we believe investors continue to have concerns about the search business, management just signed a new four-year deal with Google (GOOGL) that we estimate will generate $850 million in free cash flow over its lifetime - cash flow that we think investors are getting for free right now," the firm said.
Additionally, the firm projected that top line growth will increase by 31% in 2016 due to the company's new Instant Booking tool for its HomeAdvisor brand.
"Due to the recent focus on the Match IPO, we believe the ongoing momentum in HomeAdvisor has been largely ignored," the firm said.
IAC stock closed at $60.17 on Friday.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate IAC/INTERACTIVECORP as a Buy with a ratings score of B. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 7.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for IAC/INTERACTIVECORP is currently very high, coming in at 75.52%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IACI's net profit margin of 7.82% significantly trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.54, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that IACI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.63 is high and demonstrates strong liquidity.
- After a year of stock price fluctuations, the net result is that IACI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: IACI