Morgan Stanley Initiates Coverage on InterActiveCorp

In a report published Monday, Morgan Stanley analyst Scott Devitt initiated coverage on

with Equal Weight and a $67.00 price target. According to the report, the Match segment is seen as IACI's best asset but is a risk to the Search segment as consumers transition to a post-Wintel PC world. Healthy cash generation and capital return may limit downside. “We see IAC's online personals segment as a bright spot in an otherwise uncertain collection of assets, but recognize the strong cash generation and capital returns that the Search segment has historically provided,” the report said. “Our sum-of-the-parts analysis points to a 8x EBITDA multiple on the standalone Match segment at our $67 base case.” As IACI's Search segment remains dependent on Google, it continues to rely on Google's monetization engine for the majority of its revenue, and unforeseen changes to quality algorithms, pricing and other mechanics may impact IACI's results unexpectedly, the report noted. “While IAC likely remains one of Google's largest search partners, we believe that Google is more likely to act in the best interest of consumers than in the best interest of its monetization partners, and anticipate that future changes may carry impacts similar to the one IAC experienced in 3Q2013,” the report said. Some concerns to IACI included it may be able to carve out a meaningful niche and sustainable position in search. IACI closed Friday at $68.42.