Interactive an Internet bargain: Barron's
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By Greg Morcroft, MarketWatch
Last Update: 10:41 AM ET Feb 25, 2006
NEW YORK (MarketWatch) -- Barry Diller's conglomerate of Internet businesses, IAC/Interactive Corp, is undervalued by as much as 30% and could provide strong returns as it buys back shares and grows its businesses, Barron's reported Saturday.
Interactive's businesses include the television shopping channel HSN as well as Match.com, Evite, LendingTree, Citysearch, Ask.com and Ticketmaster.
Barron's said Interactive (IACI :
29.92, +1.28, +4.5% ) is showing growth in all of its major businesses, which contributed to a 45% jump in fourth quarter revenue, to $1.8 billion, from $1.2 billion.
In 2006, the report said revenue will likely reach $6.5 billion, with profit of $1.47 a share, up from $5.6 billion and $1.30 a share in 2005. It said analysts' early estimates for 2007 results include revenue of $7 billion and earnings of $1.57 a share.
Diller built Interactive over several years that were marked by aggressive acquisitions, but the report said its buying spree has cooled as likely targets have become too expensive.
Instead, the company has been buying back shares.
According to Barron's it bought back $1.8 billion of its stock and has recently initiated another plan to buy back up to 42 million more shares, about 12% of the fully diluted total outstanding.
Among other possible catalysts for the stock Barron's suggested are its affiliation with Liberty Media, through that firm's 21% stake in Interactive and the growing Internet search business at its Ask.com unit.
The report said Ask.com is gaining market share and now accounts for about 6.4% of the search industry's total queries, up from 5% a year ago.
According to Bill Miller, who manages funds for Legg Mason, the shares could trade as high as somewhere above $40 on a sum of the parts basis.
"It trades like a collection of very slow-growth or declining assets. Newspaper companies trade at this range or higher. But it's a much more interesting collection of assets. On a comparative basis to a variety of media assets, you get a value in the mid-30s, and on a sum-of-the-parts basis, you can get into the 40s," Barron's quoted Miller saying.
Interactive shares rose 14 cents on Friday to close at $28.64.
Greg Morcroft is New York news editor of MarketWatch.