Need To Know: Analysts Are Much More Bullish On IAC/InterActiveCorp (NASDAQ:IAC)

By
Simply Wall St
Published
January 09, 2022
NasdaqGS:IAC
Source: Shutterstock

Shareholders in IAC/InterActiveCorp (NASDAQ:IAC) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

After the upgrade, the four analysts covering IAC/InterActiveCorp are now predicting revenues of US$6.2b in 2022. If met, this would reflect a sizeable 73% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to plunge 85% to US$1.72 in the same period. Yet before this consensus update, the analysts had been forecasting revenues of US$3.9b and losses of US$1.01 per share in 2022. It looks like there's been a definite improvement in business conditions, with a revenue upgrade supposed to lead to profitability sooner than previously forecast.

See our latest analysis for IAC/InterActiveCorp

earnings-and-revenue-growth
NasdaqGS:IAC Earnings and Revenue Growth January 9th 2022

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$180, suggesting that the forecast performance does not have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on IAC/InterActiveCorp, with the most bullish analyst valuing it at US$218 and the most bearish at US$154 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that IAC/InterActiveCorp's rate of growth is expected to accelerate meaningfully, with the forecast 55% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 13% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that IAC/InterActiveCorp is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away from this upgrade is that the consensus now expects IAC/InterActiveCorp to become profitable next year. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to next year's earnings expectations, it might be time to take another look at IAC/InterActiveCorp.

Analysts are definitely bullish on IAC/InterActiveCorp, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. You can learn more, and discover the 1 other concern we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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