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Bull of the Day: Interactive Corp

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Founded in 1995, Match Group (MTCH - Free Report) and its flagship product Match.com are far and away the biggest household names in online dating.  Growing both organically and through acquisitions, the group now encompasses popular sites and apps across a broad spectrum of potential daters. Match group has 7 million subscribers worldwide and 3 million of them use Tinder - the most profitable segment of Match Group’s business for advertising.


Match Group, while an independent public company, is mostly owned by Interactive Corp (IAC - Free Report) , which holds 81% of the economic value and 97% of the voting rights in Match. Originally formed as a television media company, IAC owns approximately 150 brands across a wide swath of media - primarily internet sites. Though many are household names – like Dictionary.com, Investopedia and Angie’s List - IAC is most closely associated with the Match Group because Match contributes as much as 40% of IAC’s revenue and more than half of EBITDA in any given quarter.


In May, Social media giant Facebook (FB - Free Report) fired a huge shot across the bow at Match Group, announcing their own dating functionality - available to their more than 2 billion users, and threatening Match’s stranglehold on the internet dating market. The market pummeled the shares of both Match Group and its majority owner Interactive Corp, selling them down 25% and 20% respectively.


Read about it here>>


Facebook, embroiled in its own issues regarding user privacy and selling data has yet to produce a dating app and Match Group and Interactive Corp have both rebounded sharply with an aggressive media campaign and the earnings to back it up.


Read about that here>>


As you can see from this 5-year Price, Consensus and Earnings chart below, the Facebook sell was barely a blip on the radar and one good report got the shares rallying to basically right back where they started.



Analyst estimates for both revenues and earnings at IAC are on the rise, giving the company a Zacks Rank #1 (Strong Buy).


Here is a look at sales estimates through 2019:


And earnings are expected to rise even faster:



From IAC’s most recent investor letter from CEO Joey Levin:


Across almost every segment, our major businesses are expanding and innovating. We continue to maintain significant financial flexibility, with an aggregate cash balance of $1.7 billion and expectations of over $700 million of free cash flow in 2018, such that at year-end we should have more cash than debt. We’ve done all that while investing in ourselves and our future, having spent almost $2 billion since 2016 on acquisitions and stock repurchases.


While the market has an unfortunate tendency to over-react to bad news - especially when it comes from a big name goliath competitor like Facebook – savvy investors stay the course and even add to positions in the face of panic selling.


Interactive Corp was founded in the 1980’s to consolidate television stations and has changed and grown with the times to become the owner of some of the most popular sites and services on the web. Investors can rest easy that IAC will take on any and all competitive threats with that same fighting spirit.


 




In-Depth Zacks Research for the Tickers Above


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Match Group, Inc. (MTCH) - free report >>

IAC/InterActiveCorp (IAC) - free report >>

Facebook, Inc. (FB) - free report >>

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