JPMorgan raises IAC stock to Overweight with $60 target

On Friday, JPMorgan reinstated coverage on IAC/InterActiveCorp (NASDAQ:IAC), assigning an Overweight rating and setting a price target of $60. The move comes after a period of restriction, upgrading from a Not Rated (NR) designation, with a previous Overweight rating and a December 2023 price target of $80 prior to the restriction. Analysts at JPMorgan have also placed IAC on Positive Catalyst Watch in anticipation of the upcoming spin-off of ANGI on March 31, 2025. The stock, currently trading at $48.54, has shown strong momentum with an 8.93% gain over the past week, according to InvestingPro data.

IAC’s portfolio includes a range of assets such as a 22% ownership in MGM, an 84% ownership in ANGI, wholly owned entities Dotdash Meredith (NYSE:MDP) and Care, a 32% ownership in Turo, and approximately $1 billion in cash. According to JPMorgan, IAC’s current share price is trading near the value of its stakes in MGM, ANGI, and its cash reserves, suggesting that investors are essentially receiving the company’s other portfolio companies, valued at around $1.5 billion, for free. InvestingPro analysis shows IAC maintains a strong financial position with a current ratio of 2.8, indicating robust liquidity, and operates with a moderate debt level. The company’s overall Financial Health Score is rated as GOOD by InvestingPro analysts.

The analysts believe that the discount on IAC’s shares was reasonable in the past due to the turnaround efforts of Angi and Dotdash Meredith. However, with Dotdash Meredith now experiencing healthy growth and the planned spin-off of Angi on March 31, they expect the move to unlock portfolio value. The spin-off is seen as a way to simplify IAC’s business narrative and alleviate the persistent overhang on its shares.

JPMorgan referenced the successful spin-off of Match Group (NASDAQ:MTCH) in 2020, which led to a re-rating of IAC’s stub value from negative $1 billion pre-spin to positive $1 billion three weeks post-spin. The analysts see no reason for the upcoming Angi spin-off to differ in its potential to enhance IAC’s value.

The report concludes with a detailed overview of IAC’s key portfolio assets post-Angi spin-off. MGM and Dotdash Meredith are highlighted as the principal businesses, and a sum-of-the-parts analysis is provided along with thoughts on IAC’s capital allocation. While currently not profitable, with a market capitalization of $4.04 billion and annual revenue of $3.81 billion, analysts tracked by InvestingPro expect the company to return to profitability this year. For deeper insights into IAC’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which includes detailed analysis of the company’s Fair Value and growth prospects.

In other recent news, IAC Inc. has announced the spin-off of its subsidiary, Angi Inc., which will result in a special dividend distribution of Angi capital stock to IAC shareholders. This move is part of IAC’s strategy to streamline operations and provide direct investment opportunities in Angi. Additionally, IAC’s Board of Directors has approved an expansion of its share repurchase program, authorizing the buyback of an additional 10 million shares. This initiative reflects the company’s ongoing assessment of capital use to optimize shareholder value.

IAC has also implemented a temporary trading blackout period for its employee benefit plans, linked to the upcoming Angi spin-off. During this period, participants in the IAC Retirement Savings Plan will be unable to engage in transactions involving IAC stock funds. Furthermore, IAC’s subsidiary, Dotdash Meredith Inc., has updated its financial obligations following a merger and credit agreement amendments, providing comprehensive financial statements for the past three years.

These recent developments at IAC Inc. highlight ongoing strategic efforts, including corporate restructuring and capital management initiatives.

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