Axiom Analyst Dives Into Online Dating, Sees IAC Stock Worth $100
In a report published Wednesday, Axiom analyst Victor Anthony maintained a Buy rating on IAC/InterActiveCorp (NASDAQ: IACI), while raising the price target from $85 to $100, following the company's announcement that it intends to undertake an IPO of newly issued common stock shares of The Match Group.
The analyst believes that the online dating industry is returning to secular growth, on the back of favorable social, demographic and tech trends, including mobile. The growth is characterized by recurring and predictable subscription fees, incremental transaction fees, add-on advertising revenues, operating leverage, declining capital requirements and increasingly high cash flow margins.
"Network effects are present and high re-subscription rates drive down customer acquisition costs, leading to strong cash flow growth," Anthony said.
The analyst expects the announced IPO, which would be for less than 20 percent of The Match Group's shares, to unlock shareholder value, while also helping the company raise capital and "create a targeted investment for investors who would like more targeted exposure to the economics of the online dating industry by owning the industry leader."
According to the Axiom report, "Spinning off less than 20 percent gives IAC the ability to do a tax-free spin of its remaining ownership stake at a later date. Match is the undisputed leader in this space, with over 4M paying subscribers, more than 2.5x higher than the next competitor, and has over 20 percent global revenue market share."
Checks with Tinder users also suggests that monetization would "work well" with recurring advertising and subscriptions. The analyst expects The Match Group to deliver robust revenue and EBITDA growth over the coming three years.
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|Jan 2016||Susquehanna||Initiates Coverage on||Positive|
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