Will IAC/InterActiveCorp Break Out?

With shares of IAC/InterActiveCorp (NASDAQ:IACI) trading around $50, is IACI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

IAC/InterActiveCorp is an Internet company that operates in four segments: Search, Match, ServiceMagic, and Media and Other. Some of the websites the company owns and operates are: Ask.com, About.com, Dictionary.com, Match.com, Chemistry.com, OurTime.com, BlackPeopleMeet.com, OkCupid.com, CollegeHumor.com, Vimeo.com, Tutor.com, and many more. Through its businesses, IAC/InterActiveCorp is able to reach a large audience that engage with its websites on a daily basis. Look for the company to see rising profits as its user base continues to increase.

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T = Technicals on the Stock Chart are Strong

IAC/InterActiveCorp stock has seen a monster surge higher over the last several years. The stock is recovering from a recent pullback and seems to be headed towards all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, IAC/InterActiveCorp is trading above its untangling key averages which signal neutral to bullish price action in the near-term.

IACI

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of IAC/InterActiveCorp options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

IAC/InterActiveCorp Options

32.63%

3%

2%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

June Options

Flat

Average

July Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on IAC/InterActiveCorp’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for IAC/InterActiveCorp look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

60.53%

-20.62%

-37.68%

6.82%

Revenue Growth (Y-O-Y)

15.87%

28.20%

38.23%

40.22%

Earnings Reaction

1.06%

1.46%

-8.41%

5.96%

IAC/InterActiveCorp has seen mixed earnings and increasing revenue figures over the last four quarters. From these figures, the markets have been pleased with IAC/InterActiveCorp’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has IAC/InterActiveCorp stock done relative to its peers, MeetMe (NASDAQ:MEET), AOL (NYSE:AOL), Yahoo! (NASDAQ:YHOO), and sector?

IAC/InterActiveCorp

MeetMe

AOL

Yahoo!

Sector

Year-to-Date Return

7.83%

-53.01%

22.42%

30.55%

13.48%

IAC/InterActiveCorp has been a relatively poor performer, year-to-date.

Conclusion

IAC/InterActiveCorp provides information and entertainment services through its wide portfolio of websites to consumers and companies across the globe. The stock has been moving higher in recent years and seems to be getting ready to test all-time high prices. Over the last four quarters, earnings have been mixed while revenues have been increasing, which has pleased investors. Relative to its peers and sector, IAC/InterActiveCorp has trailed in year-to-date performance. Look for IAC/InterActiveCorp to catch up and OUTPERFORM.

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