Expanding Digital Channels Will Unlock New Advertising Markets

Key Takeaways

• Diversifying digital platforms, leveraging first-party data, and developing proprietary ad tools position IAC for sustainable revenue and margin growth amid privacy and industry changes.
  
• Revamps to core businesses and strategic capital allocation strengthen IAC's digital marketplace presence, unlock new revenue streams, and enhance resilience to market disruptions.
  
• Heavy reliance on key digital partners and brands, shrinking print revenue, and rising competition threaten growth, margins, and the sustainability of IAC's digital pivot.

Catalysts

Operates as a media and internet company worldwide.

• IAC's People Inc. (formerly Dotdash Meredith) is successfully reducing its reliance on Google search traffic by expanding and diversifying into off-platform channels (e.g., Apple News, YouTube, TikTok) and leveraging first-party data for broader ad targeting. This positions the company to capture more ad dollars as budgets continue to shift from traditional to digital, supporting higher and more sustainable digital revenue growth and incremental margin expansion.
  
• The D/Cipher+ product significantly increases IAC's total addressable advertising market by enabling cross-platform ad targeting using proprietary first-party data and intent signals-an increasingly valuable asset as privacy changes disrupt third-party data. This should drive both digital advertising revenue growth and profitability as advertisers continue to favor platforms with strong audience data.
  
• Care.com's relaunch-with improved product experience, enhanced matching algorithms, and new marketing-directly addresses past headwinds and taps into the growing demand for digital household marketplaces. As global internet and mobile penetration rises, and as Care.com expands into new verticals like senior and pet care, long-term revenue growth and improved net margins are likely.
  
• IAC's sustained strategic focus on capital allocation-through investment in high-growth digital businesses, opportunistic M&A, and unlocking value from assets such as MGM and private holdings-enables both organic and inorganic earnings growth, and could lead to higher return on equity and multiple expansion.
  
• Rising user engagement with IAC's premium branded content across a growing ecosystem (including the People app, MyRecipes, events, and licensing deals) monetizes persistent digital transformation trends, providing new revenue streams (e.g., licensing to AI firms), incremental margin opportunities, and resilience against industry disruption.

IAC Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming IAC's revenue will decrease by 12.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -12.9% today to 3.2% in 3 years time.
• Analysts expect earnings to reach $80.5 million (and earnings per share of $1.13) by about August 2028, up from $-479.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $159.2 million in earnings, and the most bearish expecting $-4.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 50.7x on those 2028 earnings, up from -5.8x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 16.3x.
• Analysts expect the number of shares outstanding to decline by 6.93% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.39%, as per the Simply Wall St company report.

IAC Future Earnings Per Share Growth

Risks

• The company's dependence on Google Search for traffic, while reduced, remains significant (28% of traffic; 64% of Digital revenue still session-driven), and the rapid expansion of Google AI Overviews (now on 50%–55% of relevant searches) continues to drive step-downs in click-through rates; further algorithm or UI changes by Google or increased prevalence of AI-driven search could structurally reduce traffic and revenue growth.
  
• While management claims diversified revenue streams, there's an admission that the largest and most successful brands within the portfolio are "carrying the water," creating concentration risks-if a key property underperforms, consolidated revenue and earnings would be materially impacted.
  
• The ongoing secular decline in print revenue (acknowledged as a managed-for-cash business expected to continue shrinking) could weigh on overall growth rates and cash flows, making the company increasingly reliant on digital revenue and successful execution in new digital channels.
  
• People Inc. and Care.com are both investing heavily in technology, products, and marketing to drive growth, but if these new initiatives (such as D/Cipher+, apps, or product relaunches) do not deliver sufficient ROI, margins may remain compressed or erode further, negatively impacting net margins and earnings.
  
• Intensifying competition from tech giants (Google, Meta, Amazon), new AI content platforms, and social/mobile ecosystems (Apple News, TikTok, etc.) risks making user acquisition more expensive and retention more difficult; this could elevate costs, compress margins, and slow revenue growth, especially as the industry further fragments and disintermediation trends (brands connecting directly with consumers) erode the value proposition of IAC's intermediary and legacy platforms.

Valuation

• The analysts have a consensus price target of $48.692 for IAC based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $39.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.5 billion, earnings will come to $80.5 million, and it would be trading on a PE ratio of 50.7x, assuming you use a discount rate of 9.4%.
  
• Given the current share price of $34.98, the analyst price target of $48.69 is 28.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.