IAC/InterActiveCorp.

IACI : NASDAQ : US$51.91
HOLD 
Target: US$56.00

COMPANY DESCRIPTION:
InterActive Corp runs a portfolio of Internet businesses focused primarily on Online Dating (Match.com), Search (Ask.com), Media, and Local Commerce.

DOWNGRADE TO HOLD ON MORE BALANCED RISK/REWARD
Summary
We are trimming our estimates for Q3 and Q4/13 and lowering our rating from BUY to Hold. We continue to believe the stock
offers valuable defensive qualities given the undemanding valuation and capital return track record. In addition, we believe
strength in the Match segment should continue. However, with continued headwinds in core Search and the stock up ~31% since bottoming after Q4 earnings to within ~8% of our target price, we believe the risk/reward is more balanced at the current level.
Key Points
 Trimming margin assumptions for this year – IAC is growing more slowly than it used to, leading to lower incremental
operating leverage, and we are trimming our margin outlook in most segments for the balance of this year.
 Slower buyback activity – we note that although IAC still buys back as much or more stock as any company we cover, the
pace has slowed over the past several quarters.
 Still defensive qualities – we note the stock offers an ~2% dividend yield and the valuation at only 11x next year’s EPS
is undemanding.
Valuation
Our price target remains unchanged at $56, which is based on 12x our unchanged 2014 EPS estimate of $4.63.

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