October 24, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Look out for the computers! Shares of IAC/InterActive (Nasdaq: IACI ) actually beat expectations on its top and bottom lines, but shares dropped by as much as 14% before triggering a Nasdaq OMX (Nasdaq: NDAQ ) circuit breaker that halted its trading. The sudden drop was blamed on the confusion surrounding FactSet Research's misinterpretation of IAC's forward guidance. Despite quickly clearing things up, IAC's shares finished down more than 8%.
So what: IAC beat revenue estimates with results of $714.5 million, and EPS estimates with results of $0.71. Analysts had expected $692.8 in revenue and $0.65 in EPS. Shares actually began the day slightly higher than their closing price on Wednesday, but FactSet's mixup was interpreted by trading algorithms as a guidance cut. High-frequency trading expert Eric Hunsader of Nanex took to Twitter after the circuit breaker was tripped to point out several instances of attempted computer trades in the middle of the stock's halted period. The Nasdaq exchange later canceled a five-minute window of trades, contributing to the stock's short-lived rebound.
Now what: IAC's guidance may not have been particularly impressive, but the sustained drop, as Benchmark Co. analyst James Dobson said earlier today, is "an overreaction to a bunch of things." IAC's top and bottom lines have both posted steady improvements in recent years, and investors shouldn't run for the hills before learning more about the company's plans for the future.
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