gets all the attention, but shrewd investors would be wise to keep an eye on
-- the only other major Internet stock in the black this year -- when it reports third-quarter earnings Tuesday morning.
And since the stock has outpaced even Google since the beginning of August, investors will be watching closely to see if InterActiveCorp can continue to grow Ask.com, its hottest Internet property -- and the only other search engine aside from Google to increase market share during the last quarter.
In the wake of the stock's rising valuation, investors will be especially eager for evidence that IAC/InterActiveCorp can deliver on the benefits of operating as an integrated holding company. IAC's operations run across a variety of popular consumer businesses including dating site Match.com, search engine Ask.com, mortgage financing site LendingTree, local information provider Citysearch and ticket vendor Ticketmaster, among others.
Investors tend to shy away from complex business structures. But IAC argues that it benefits from having fingers in many pies. This enables it to shift resources quickly when needed and apply insights and best practices from one business to another.
IAC/InterActiveCorp is expected to report 33 cents a share for the third quarter, according to a consensus of analyst estimates at Thomson/First Call. That's up from 26 cents a share for the same period a year ago and slightly above the 32 cents a share the company delivered in its prior quarter.
Revenue is expected to come in at $1.61 billion, up 8.8% from $1.48 billion a year ago, and remain flat sequentially.
Response to IAC/InterActiveCorp's earnings may benefit from positive sentiment as investor appetite for Internet stocks has grown recently. Enthusiasm about Google's blowout quarter seems to have
engulfed the sector, overshadowing more measured reports by
IAC/InterActiveCorp also heads into its earnings announcement on the heels of news Friday that Ticketmaster signed a deal to provide ticketing operations for the 2008 Olympics in Beijing.
Still, growing signs that the broader economy is slowing may dampen investor hopes because of IAC/InterActiveCorp's exposure along a couple of lines. It owns HSN (Home Shopping Network), an already beleaguered television-retail outfit, and a slumping economy would make progress even more difficult for its recently rebuilt management team. HSN accounts for nearly half of IAC/InterActiveCorp's revenue.
LendingTree, meanwhile, could face more hurdles as the mortgage refinancing business and real estate market continue to slow.
But investors will be particularly interested in hearing about the progress of Ask.com, the rebranded version of search engine AskJeeves.com, which IAC purchased in July 2005. While responsible for only a sliver of the overall search market, Ask.com has been able to inch up its share, while larger rivals such as Yahoo! continue to cede ground to search leader Google.
In its second-quarter conference call to investors, CEO Barry Diller expressed high hopes for eventually linking Ask.com queries with content from Citysearch, thereby giving the conglomerate a powerful player in the rapidly growing local search domain.
It would also provide investors with a prominent, tangible measure of how the sum of IAC/InterActiveCorp's businesses can sometimes equal more than the parts.
In the meantime, investors seem willing to give the company the benefit of the doubt, given some promising trends.
While IAC/InterActiveCorp continues to make new acquisitions, it is setting its sights on smaller targets and is focusing increasingly on making the most of the businesses it already owns. During the quarter, the company picked up a controlling interest in Connected Ventures, the parent company of Web site CollegeHumor.com. While the size of the deal was not disclosed, it is likely to be much smaller than the $1.7 billion that IAC/InterActiveCorp shelled out for Ask.com.
And while IAC/InterActiveCorp remains more difficult to value than most companies, it has become less so after the spinoff of its travel businesses into
in August 2005.
"Following an aggressive consolidation strategy from 2000 to 2003, we expect IACI to focus increasingly on smaller deals and internal development," writes Standard & Poor's analyst Scott Kessler in a research note. "We believe the spinoff of its travel operations reduced IACI's complexity and risk profile."