Essentially all of this surge came in the first three days of May, following the announcement of IAC/InterActiveCorp's HomeAdvisor service joining forces with Angie's List (NASDAQ:ANGI) in a spin-out merger. On the other side of that negotiating table, Angie's List shares immediately went up 66% higher and doubled in value before the month was over.
Analysts were quick to embrace the merger, arguing that the move unlocks value in IAC/InterActiveCorp's conglomerate business model. Cowen analyst John Blackledge, for one, expects the deal to "result in massive value creation" as the merged business casts a large shadow on the vibrant home services market.
"The transaction will combine the best marketplace operator (HomeAdvisor) with the legacy brand leader (Angie's List)," Blackledge noted. In other words, the new ANGI Homeservices business should be more valuable than the sum of its parts as synergies develop between those two powerful branding effects.
IAC/InterActiveCorp is off to a strong start in 2017, gaining more than 60% in the first five months. Share prices are running red-hot at the moment, trading at 24 times forward earnings with a PEG ratio close to 3.0. As a reminder, a 1.0 PEG ratio would indicate shares trading close to their fair, growth-adjusted value and higher numbers make for a more expensive stock. I wouldn't be surprised to see IAC/InterActiveCorp shares taking a breather at this level.