Nomura Bullish On InterActiveCorp, Cautious On ANGI Homeservices After Quarterly Reports

Nomura Instinet is staying bullish on IAC/InterActiveCorp IAC after its second-quarter report Wednesday and word that IAC is considering shedding its publicly traded subsidiary ANGI Homeservices Inc ANGI — which was the only real drag on IAC during the quarter.

That weakness from ANGI Homeservices, which is the holding company for digital services marketplace Angie’s List, and missed Wall Street estimates for a third straight quarter, kept Nomura Neutral on ANGI Homeservices stock, with lowered price expectations.

The Analyst

Mark Kelley maintained a Buy rating on IAC/InterActiveCorp and boosted the target price from $282 to $314.

Kelley maintained a Neutral rating on ANGI Homeservices and lowered the price target from $17 to $9.

The Thesis

IAC had a good quarter, Kelley said in a Friday note — but it would have been better if it hadn’t been for its more than 80% stake in ANGI Homeservices. (See his track record here.) 

IAC’s “marginally better” top line and EBITDA beat were boosted by positive results from another public company in which it has an 80% stake: Match Group, Inc. MTCH, which also reported a good quarter this week.

Those positives from Match were offset by the negatives from ANGI, the analyst said. 

The company’s disclosed this week that it is considering selling off its stake in not just ANGI Homeservices, but in Match Group as well.

IAC CEO Joey Levin said the company hasn’t made a final decision, but announced it is considering the sales in a letter to shareholders this week. IAC also announced it is taking a $250-million stake in the car-sharing company Turo.

That move, along with the 18% year-over-year revenue growth turned in by Match and strong revenue increases from IAC’s Vimeo and Dotdash businesses continue to make it a good buy despite a high price, Kelley said. 

"We still believe IAC offers a compelling risk/reward at current levels, and see upside to our revised target of $314." 

ANGI Not as Much

ANGI Homeservices pro forma revenue growth was up 20%, but it missed Street expectations for a third consecutive quarter, and this quarter’s shortfall was the biggest, Kelley said in a separate note. 

“Management noted that it’s behind where it thought ANGI would be at this point and called out issues with marketing, and Google Search changes in particular,” the analyst said. 

Price Action

IAC shares were down 0.69% at $255.05 at the close Friday, while ANGI shares were down 5.69% at $8.86. 

Related Links:

IAC CEO Says Match Group Can 'Stand On Its Own'

IAC/InterActiveCorp Reports Q2 Sales Beat

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