Why IAC/InterActiveCorp Shares Plunged

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: Shares of IAC/InterActiveCorp (Nasdaq: IACI  ) plunged by as much as 11% today after the company received an analyst downgrade.

So what: Goldman Sachs dropped its rating on IAC from "neutral" to "sell" while reducing its price target from $53 to $42. The analyst sees increased risk in competition for traffic, and companies such as IAC are subject to changes in Google's (Nasdaq: GOOG  ) search algorithms, since they generate a large portion of their traffic from the search giant.

Now what: AOL (NYSE: AOL  ) and Demand Media (NYSE: DMD  ) have been exploring  a similar strategy that will put competitive pressure on IAC as the rivals bid up keywords. Under a best-case scenario, analyst Heath Terry believes cost of revenues will move higher as competition increases, but in the worst case, large segments of revenue could be threatened altogether by policy changes at Google. That's a big risk, since Internet searches generate more than half of the company's revenue.

Interested in more info on IAC/InterActiveCorp? Add it to your watchlist by clicking here.

 

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2139382, ~/Articles/ArticleHandler.aspx, 10/25/2014 12:37:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement