Bear of the Day: IAC Inc (IAC)

IAC Inc. (IAC) is facing challenges in unlocking shareholder value, as its stock and recent spinoffs like Match Group, Vimeo, and ANGI have declined significantly in the last three years. Despite strengths in digital printing businesses, IAC's medical subsidiary, Care.com, is underperforming, and overall sales are projected to decline 35% this year to $2.48 billion. Fiscal year 2025 EPS estimates have dropped over 30% in the last 60 days, indicating potential short-term risk for IAC shares despite a healthy balance sheet.

Analysis

IAC Inc. is confronting a significant and prolonged decline in its stock value, primarily due to the ineffectiveness of its long-standing strategy to incubate, scale, and spin off digital businesses to enhance shareholder value. This strategic failure is highlighted by the substantial stock price drops of 40% or more over the last three years for IAC itself and its recent spinoffs, including Match Group (MTCH), Vimeo (VMEO), and Angi Inc. (ANGI). Profitability remains a major concern, with IAC projected to report an adjusted loss of -$2.23 per share in fiscal 2025, a marked deterioration from the -$1.04 loss estimated just two months prior. Furthermore, EPS estimates for the upcoming fiscal year have been slashed by over 30% in the past 60 days, falling from $1.96 to $1.33. While IAC's portfolio exhibits strength in its digital printing operations like Dotdash Meridith and The Daily Boost, these gains are offset by challenges within its medical subsidiary, Care.com, which is grappling with product and marketing issues that negatively impact the bottom line. Compounding these difficulties, IAC's annual sales are anticipated to plummet by 35% this year to $2.48 billion, down from a peak of $5.2 billion in annual sales over the last five years, questioning the company's ability to efficiently manage costs post-spinoffs. Despite possessing a healthy balance sheet and valuable assets like Dotdash Meridith, the current trajectory suggests continued short-term risk for IAC shares.

Key Decisions for Investors

• Investors should exercise considerable caution regarding IAC, given its persistent stock underperformance, significant negative revisions to earnings per share forecasts, and a projected steep decline in annual revenue.
• The repeated failure of IAC's core spin-off strategy to generate shareholder value, as demonstrated by the poor market performance of its separated entities like MTCH, VMEO, and ANGI, necessitates a critical evaluation of the conglomerate's long-term value creation capabilities.