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Bear of the Day: IAC Inc (IAC)

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Although IAC Inc. (IAC - Free Report)  has played a major role in acquiring, developing, and scaling several successful businesses, its stock has been on a continued downturn in recent years.

Unfortunately, despite being viable businesses, many of IAC’s spinoffs have had very lackluster stock performances as well, as the multi-sector conglomerate has failed to capitalize on its goal to unlock shareholder value following their independence.

 

Profitability Concerns & Declining EPS Revisions

Cutting to the chase and pinpointing investors' concerns, IAC is still expected to post an adjusted loss of -$2.23 a share in fiscal 2025. While IAC’s portfolio has seen strength from its digital printing businesses, such as Dotdash Meridith and the Daily Boost, its medical subsidiary, Care.com, has faced both product and marketing challenges that have affected the bottom line.

Diluting optimism, IAC is projected to post EPS of $1.33 next year, but estimates have dropped over 30% in the last 60 days from projections of $1.96. This comes as FY25 EPS estimates have fallen from a much narrower than expected adjusted loss of -$1.04 two months ago.  

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IAC Struggles to Unlock Shareholder Value

Having a long-standing plan to incubate promising digital businesses, scale them, and then launch them independently to unlock shareholder value, it’s noteworthy that this strategy hasn’t worked out for IAC of late.

To that point, IAC stock and its recent spinoffs, Match Group (MTCH - Free Report) , Vimeo (VMEO - Free Report) , and ANGI inc. (ANGI - Free Report)  have all fallen 40% or more in the last three years.  

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More perplexing is that IAC’s top-line growth was not that overwhelming before establishing its more successful subsidiaries as stand-alone companies, seeing a peak of $5.2 billion in annual sales over the last five years.

This begs the question of whether IAC really capitalized on its efforts and will be able to efficiently capitalize on lower operating costs going forward, as annual sales are expected to drop another 35% this year to $2.48 billion.

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Image Source: Zacks Investment Research

 

Bottom Line

Quite frankly, it's still hard to see how IAC stock could be positioned for a rebound, even with strong assets like Dotdash Meridith and a healthy balance sheet. This may buy the company time and hopefully strengthen its long-term prospects at some point, but for now, more short-term risk is likely ahead for IAC shares.


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