IAC INC IAC
February 10, 2023 - 7:23pm EST by
amorfati
| 2023 | 2024 | ||||||
| Price: | 51.95 | EPS | 0 | 0 | |||
| Shares Out. (in M): | 89 | P/E | 0 | 0 | |||
| Market Cap (in $M): | 4,616 | P/FCF | 0 | 0 | |||
| Net Debt (in $M): | 1,100 | EBIT | 0 | 0 | |||
| TEV (in $M): | 5,716 | TEV/EBIT | 0 | 0 | |||
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Description
IAC Inc. (NYSE: IAC) is no novel name here. There are 9 write ups on VIC. The earliest pitch dates back to March 3, 2009, and the latest is dated Apr 5, 2022. I intend this 10th write up here to serve not as an seminal introduction, but a continuation, or periodical re-evaluation of the IAC long thesis in the present, rather precarious macro environment. In the final analysis, I propose that IAC is decent long at this level.
IAC Overview
IAC is a US-based holding company specializing as an owner/operator/investor of internet/websites, and media enterprises. At the helm of IAC is Internet/media billionaire investor Barry Diller, who's established an evidently positive track record in generating shareholder value via investing, developing, and reselling the many businesses with which IAC has been involved.
The model executed by IAC has been to acquire businesses at opportunistic pricing, hold them, and/or enhance them through development, and eventually resell them at a profitable higher pricing. The approach - helmed by Diller's leadership - has been profitable. Up until Jun 2022, 6 months before the subsequent equity market tumble, of which we are still amidst, IAC's produced 13% CAGR for shareholders, inclusive of its cash and stock distribution to shareholders since inception in the 1990s.
The portfolio of businesses held by IAC is constantly evolving as the company buys, develops and churns its holdings. At the current moment, IAC's portfolio is comprised of Dotdash Meredith, ANGI, Care.com, MGM Resorts, Turo, Ask Media, and a slew of nascent internet business / website enterprises folded under the "Emerging & Other" segment reported in IAC's financials.
To get right to the point, the SoTP table below tabulates my estimation of what each businesses are worth - based on current market pricing.
Corporate Overhead Expenses
This figure for IAC is about $87 million in Adj. EBITDA for Q1 to Q3 2022, pro-rating to $87 million for FY2022. A 10% discount rate applied to run-rate equates to roughly $900 million in EV, or $10 per IAC share.
Cash balance
IAC balance sheet items, including cash holdings, Dotdash Meredith net debt, and non-cash working capital, total to -$3.6 per IAC share.
Public Holdings - ANGI
Per the most recently filings of Q3/23, IAC's publicly traded stock holdings comprise of 1) ANGI Inc. (ANGI) and 2) MGM Resorts International (MGM).
In ANGI, IAC owns 2,579,264 class A shares and 100% of ANGI Class B shares.
Public Holdings - MGM
In MGM, IAC owns 64,723,602 common shares, roughly 17% of MGM shares outstanding.
The average cost basis of IAC's MGM stake is by my estimate $23.63/sh derived from MGM's disclosures as of Sep 30, 2023.
My implied cost basis puts IAC's MGM holding value, net of 20% capital gain tax, at $26 per IAC share.
IAC's ANGI stake as of Feb 10, 2023 is worth $13.81 per IAC share by my estimate. In total, ANGI + MGM holdings are worth a combined $42.79 per IAC.
Dotdash Meredith
Dotdash Meredith operates a portfolio of 40+ brands of digital content and printed magazines reaching an audience of 200 million+ readers who are mostly women. The business comprise of 1) IAC's legacy company called Dotdash - which consists of a collection of digital-only branded content, and 2) Meredith National Media - acquired on Dec 2, 2021 and consisting of a collection of digitally and printed magazines brands.
Together, these publishers generate revenue via 1) display of advertising; 2) commission generated from advertised products sold; 3) licensing of Dotdash Meredith brands; 4) subscriptions/newsstand of printed magazines; 5) custom works for advertisers including custom publishing, marketing, search engine optimizations etc. Revenue from the digital and printed businesses are about even (45%-55%), with the printed magazines operating a lower margin and strategically sustained to maintain brand awareness for supporting the online/digital business, which is the predominant generator of bottom line. As of 2022, EBITDA from digital segment is in the mid-teens while printed magazine EBITDA is in the LSD. Because the preponderant of the bottom line is generated from digital business and roughly 2/3 of digital revenue are advertising while 20% are commission of advertised products sold, the main driver of the Dotdash Meredith business are online digital advertisements and online sales of advertised products.
Since its purchase of Meredith in Dec 2021, Dotdash Meredith has experienced a tough 2022. On the bottom-up, the integration of Meredith assets into the Dotdash platform has run into hiccups, causing delays to revenue ramp up previously projected at acquisition. IAC explained that the migration of Meredith publishing content/brands to Dotdash platform has been more difficult than anticipated, and technical capabilities were challenged in the execution process. This resulted in a drag on website traffic and related revenue in Q1 to Q3 2022. The company claimed on the Q3/22 earnings call that these issues are largely behind the company heading into the year end. However, it's conceivable to me that some aftereffects of integration issues would linger into 2023. Further, the company noted that traffic to its websites generally decline in the initial months after integration onto the Dotdash platform, so even for the sites that've successfully gone through integration, traffic will take several months to recover beyond levels pre-integration. On the top-down, advertising demand were weak, with rapid declines in mid 2022 from several categories including retail CPG and home. In aggregate, the double-whammy of a obstacle-ridden integration process and weak macro advertising demand resulted in a underwhelming year for Dotdash Meredith. On a pro-forma comparable basis, both digital and print revenue are down on a y/y basis for every month in 2022. Print revenue has deteriorated at a faster pace than has the digital business while negative revenue momentum for both segments accelerated throughout the year and into the year end.
On a forward looking basis, management expects H1/23 prospects to remain flattish on choppy and stagnant advertising demand while H2/23 to see some growth from reaping from Dotdash's post-integration efforts. It's worth highlighting here that even for the back half of 2023, management does not project a much more robust advertising market. Instead, IAC stated on Q3/22 that "Overall, we are not sanguine on the ad market, especially in the first half of the year. And so we are focused on our need in improving our sales, driving the consumption increases, and we're really in that fine-tuning mode of content, ad serving e-commerce on the Meredith sites." In essence, growth next year will have to come from the success of Dotdash's post-integration efforts, with little tailwind from an advertising environment expected to remain tough.
For forecast, I assume that 1) 2023 sees slightly improved EBITDA margin from efficiency gains of Meredith-Dotdash integration; 2) industry advertising demand will be weak in the first half but recover somewhat in the 2nd half. Global ad analytics firms have repeatedly revised lower 2023 outlooks. A WSJ article in Dec 2022 listed 2023 ad spend outlook from several research firms. The range for 2023 ad spend growth rate varies from 4.8% to 6.5%, down from mid-to-high single digits a few months earlier, so I'd conservatively assume digital sales topline remain flat in H1/23 per management's outlook while H2/23 sees a slight pick up of 10% from y/y 2022; 3) print revenue continues to tumble on what appears to me to be a secular decline independent of the current environment.
I forecast Dotdash Meredith revenue to be ~$1.96 billion for FY2022 and essentially flat for 2023.
For EBITDA, I assume 2023 digital print EBITDA of 21% and print EBITDA of 6%, on par with those of FY2022. These assumptions yields to digital EBITDA of $208 million and print EBITDA of $60 million. Unallocated corporate expenses attributed to Dotdash Meredith remains at $65 million, pretty much offset by the print EBITDA, as expected by management.
The following illustrates the EBITDA assumptions and logic in details.
Over the longer term, IAC's aspirational outlook envisions the current ~20% EBITDA margin on the digital business growing to mid-30%, fuelled by the drive into e-commerce.
"We are at a point of really negative leverage, given the revenue declines. And so we've said -- we expect a marginal dollar of digital revenue to produce $0.50 to $0.60 on the dollar on EBITDA. We'd actually expect the next X amount of revenue to be at a much higher margin, given fixed cost and the nature of it. We've seen it in some of the private players, Red Ventures, others that would be comparable to certain things we're doing. But those -- we feel pretty good about getting to mid-30s margins on an EBITDA basis overall. It's hard to talk about the -- because you've also got different categories. And if we drive -- the more we drive e-commerce, the higher those margins will be."
This may be an achievable target, but I've been disappointed by enough management teams touting aspirational targets that invariably had issues materialising, so I wouldn't bank on the digital business growing to a 30% margin anytime soon, especially given current macro-headwinds weighing on revenue growth required for the said margin expansion.
So how does Dotdash Meredith stack up to peers? Based on the few US public comps found, I find it hard to argue for Dotdash Meredith trading at parity with NYT, because NYT has a slightly higher margin, seems to have been / are growing at a faster rate, and notably holds better + more concentrated brand name. Conversely, I'd think that Dotdash Meredith would still fetch a higher valuation than would Gannett and Lee Enterprises, which are traditional news-centric publishers that seem stale to me. So, I strike the middle ground by assigning Dotdash Meredith with multiple that is the group average that is the blended reflection of all the publishers I found.
At 10x 2023 EBITDA, Dotdash Meredith is worth $2.0 billion in EV or $22.6 per IAC share. Minus Dotdash Meredith net debt of $1.4 billion, equity value would be worth $600 million, or $6.6 per IAC share.
Turo
As of the end of Q3/22, IAC holds a 26.7% interest in Turo on a fully diluted basis in the form of preferred shares. Turo is a privately owned company providing peer-to-peer car sharing marketplace akin to what airbnb provides for real estate rentals. Per Turo's preliminary proxy filing of Dec 14, 2022, the company is currently the largest car sharing marketplace globally. As of twelve months ending Q3/22, the platform boasts 160,000 active hosts, 300k vehicles active across 10,000+ cities in Canada, UK, France, US, Australia as recent launch in Nov 2022, and 2.7+ million active guests that grew 110% y/y. The company launched in 2010.
IAC's cost basis associated with this ownership is approximately $275 million by my estimate, based on IAC's disclosures of purchases made in July 2019 (initial stake), Q4/20, Q1/21, and H2/21. The implied full equity of Turo at cost would be ~$1 billion in July 2019 at IAC's initial investment. At present, I estimate Turo equity fair value at $2.4 billion. This implies IAC's stake in Turo is currently worth $5.8 per IAC common share.
Performance over the past 3 years has been positive and appears evidently blossoming in the right direction. Net revenue has grown consecutively y/y. Even for FY2020 in which Turo competitors experienced revenue decline on a y/y basis, Turo's revenue grew. Emerging out of the worst phase economic disruptions in 2020, Turo then more than tripled revenue from 2020 to 2021. For full year 2022, revenue is set for another healthy upsurge from the previous year as YTD Q3/22 revenue has been disclosed to have grown ~70% y/y. In my opinion, the past few years of resilient topline growth momentum amidst a particularly tumultuous environment confirms the attractive prospects of the Turo business model. Meanwhile, cost margin continues to shrink on an expanding revenue base. The company became EBITDA positive in 2021 as every categories of costs (G&A, sales & marketing, product development, and Ops support) declined % of revenue. Though no guidance has been provided, I believe that as revenue continues the current growth trajectory, EBITDA margin would improve further. This expected bottom line growth thus presents as positive catalyst in addition to the topline growth.
Correspondingly, traffic on the site kept growing as more users engage the platform. Turo presents in the proxy two key business metrics. Days is defined as total days for a vehicle booked by guests in a given period net of cancellations. Gross Book Value is defined as the total value collected from guests for the Days booked on the platform. Both metrics have steadily improved over the past 3 years.
Nonetheless, it's difficult to surmise what the future holds in store for Turo. With relatively scarce disclosures available, the only line items that I'd propose to forecast with passing threshold of reliability are the FY2022 and at most FY2023 net revenue figures. Q1 to Q3 2022 revenue grew 69% from same period of 2021. Historically over the past 3 years, Q4 revenue constituted 27% to 29% of FY revenue, so bearing these relationships, I estimate Y2022 revenue at ~$800 million (with Q4 revenue amounting to 30% of FY revenue). This would result in a 70% revenue growth for 2022. Consensus estimates on Turo's competitors imply a 2023 for the car renting industry with essentially flattish growth. Still, on account of Turo having grown 6% in 2020 while a list of pubic peers collectively experienced a 40%+ revenue decline, I'd contend that Turo will continue to grow in 2023, albeit at decelerating pace. Based on this consideration, I broad-stroke FY2023 revenue growth at 25% from 2022 (down from 70% for 2022).
For comps, Turo's publicly traded car-renting peers that I came across are Avis Budget Group, Hertz, HyreCar, Sixt Rent-a-car, and Getaround. Uber and Lyft can be also thought of as a adjacent competitors as both companies predominantly generate revenue from providing non-ownership transportation services substitutable with car-renting.
I would argue that Turo's should be benched against its large car rental peers which have the most similar business model vis-a-vis Turo. In my opinion, compared to these peers, Turo deserves a premium multiple because the company's airbnb model for car-rental has been successfully gaining traction while its legacy car-rentals have struggled in recent years.
This divergence in performance in my estimation appears to at least partially stem from Turo's rental model, which I view as superior and more convenient than are traditional car rental model in which renters undergo a more tedious process for renting a car. Over the past 3 years, Turo has already achieved better growth. Further, heading into 2023, I'd project Turo to continue growing quicker than do peers given its model and as there continues to be a supply shortage in rental cars - a positive for Turo but an overhang for the legacy car rental peers. The semiconductor shortage impinging new vehicles production also lingers, further exacerbating vehicle shortages that may impede vehicle purchases, thus shifting traveller demand to the rental bucket, in which I'd content that Turo is better positioned to serve than will traditional model car rentals.
Turo's publicly traded car rental peers are trading at roughly 2.4x FY2022 revenue. Applying a slight (probably conservative) premium of 2.5x to my Turo's FY2022 revenue estimate, I arrive at ~$2 billion enterprise value or $2.3 billion equity fair value for Turo.
Based on Turo's Dec 2022 disclosure of share count including dilutive securities and IAC's ownership equivalent to 67,523,796 Turo common stock, IAC's Turo stake would be worth ~$520 million. This implies ~$5.8 per IAC share per 88,856,377 IAC shares outstanding on Nov 4, 2022.
Search
IAC's Search segment consists of 1) Ask Media Group (a collection of websites, search engines, blogs) and 2) the Desktop business (a collection of legacy desktop browser applications and websites providing access to function specific tools/online content etc). Both divisions generate revenue via display of advertisements and affiliate marketing on its websites, with the majority of advertisements displayed by both supplied by Google pursuant to various services agreements, though some ad inventory is also provided by non-google programmatic ad networks.
In my view, Search operates with mediocre prospects, but the segment still holds a meaningful portion of value for IAC because its performance is stable enough, on a sufficiently large revenue base.
The Desktop business is being phased out as IAC has indicated that the evolving e-commerce ecosystem is rendering browser-applications offerings obsolete. Revenue from this business is predominantly generated from advertising of paid listings presented to users via the results of their browser-app search queries. A minor portion of revenue is also generated from subscriptions fees paid by users of downloadable desktop applications.
Since at least 2018, Desktop revenue has declined y/y because of what appears to be the obsolescence of browser-applications. IAC has also explicitly stated that the Desktop business has been adversely impacted by various Google Service Agreement policies changes enacted from Jul 1, 2019 to Aug 27, 2020. In Q4/20, Google also suspended some of Desktop products, further exacerbating sales decline concurrent to effects of Covid. Google policies changes continued to vitiate Desktop revenue in 2022. This in my opinion will persist into future years as IAC winds down the Desktop business. For FY2022 and FY2023, I forecast Desktop revenue of $106 million and $66 million, respectively, predicated on the assumptions that revenue from this legacy business continues to decline at pace saw in 2020 to 2021.
On the brighter side, revenue has grown at Ask Media Group as the portfolio of Ask Media websites gain traction. The Ask Media Group is the focus for the Search segment. This business consists of a collection of niche-based websites providing information and general search services. Revenue are generated from affiliate marketing and advertising from the websites. Notable constituents within the Ask Media portfolio include
- Ask.com - a search engine also providing a variety of content on entertainment, travel, and lifestyle;
- Reference.com - a search engine with content on sciences, history, and liberal arts;
- ConsumerSearch.com - a website with consumer focused content including gadgets, family/pets etc.
- shopping.net - a search engine catering to shopping related queries
- OhDeal - a search engine querying consumer related deals - a blog with lifestyle content such as homemaking, dating, parenting, or general life.
From 2018 to 2022, Ask Media grew revenue in all years except for 2020 in which Covid-disruptions brought about slow-down for the industry. Nonetheless, recovery in 2021 more than offset revenue loss in 2020 and elevated revenue to new highs. Increased visitor traffic has continued to fuel revenue growth in 2022. Thus far, Ask Media appears to maintain healthy growth momentum. However, a closer look under the hood suggests to me that not everything is swell as the division top sites have all been losing traffic in 2022, portending further slow down for 2023.
With considerations to Ask Media sites experiencing some traffic declines, I forecast Ask Media revenue of $748 million for FY2022 and $800 million for FY2023, based on the outlook that 2022 finishes marginally better than 2021 and 2023 seeing some recovery in organic site traffic, just so that I am not overly pessimistic in my expectations.
As for EBITDA, the figure is harder to forecast as IAC does not break down the respective margin for the dying Desktop Business and the growing Ask Media Business, but past several years of figures clearly shows that as Desktop revenue declined in proportion to Ask Media, margin has declined, indicating to me that Desktop held thicker margin. Going forward, for 2023, I forecast 12% EBITDA margin for 2023 on what I suppose to be higher margined Desktop revenue being replaced by the relatively lower margined Ask Media revenue.
The Search segment will by my estimate generate in FY2023 $800 million revenue, with ~12% EBITDA margin or $118 million EBITDA. GOOG with ~40% margin is trading at 3.7x NTM revenue and 9+x NTM EBITDA, so Ask should be trading at a much lower multiple. At 4x EBITDA multiple, Search would be worth $475 million, or $5.35 per IAC share.
Emerging & Others
IAC's Emerging & Other segment currently consists of a collection of businesses under development. The preponderant of these businesses are essentially websites/online platforms providing niche-services. The crown jewel of the segment is the care.com business.
In Feb 2020, IAC acquired Care.com, an online marketplace for people to provide and obtain caregiver services for children, tutoring, pet, housekeeping, senior care, and special needs. Through the website, care.com matches customers and care providers of these care services akin to what airbnb does for real estate rentals and what Turo does for car rentals. Care.com also provides its own set of customer payment solutions enabling consumers various payment options, autopay, payroll processing, tax filings. For corporate customers providing their employees benefits of caregiving services, Care.com also provides enterprise-based accommodations entailing comprehensive suites of services for employees who needs alternative child care, services for consultations on work-life challenges, etc.
Revenue is generated via subscriptions fees from customers and care providers using care.com as well as from annual contracts with corporate customers procuring care services for employees. Prior to IAC's purchase in Feb 2020, Care.com was growing, but topline growth had started to decelerate while memberships grew at a linearly steady pace.
IAC comments at a GS conference on Sep 13, 2022 provided some context around the pre-acquisition care.com...
when we bought it, [...] it was a challenged company struggling on background checks, overall marketing number of areas. The last 2 years were really about improving the platform, improving service provider management, building out the technology and then rolling out some of the newer projects like -- products like Instant Book.
Since the acquisition, Care.com figures are no longer disclosed, but LTM revenue ending Q1/22 was $340+ million while IAC has mentioned that it expects 10-20% growth y/y for 2022. Extrapolating on these figures, I'd ballpark FY2023 revenue for Care.com to be $370 million approximately. IAC has indicated on multiple occasions that care.com is the gem of the Emerging & Other division and that it remains steadfast on making transformational investments in care.com to achieve organic growth, based on the view that the migration from offline to online for senior / child care is a compelling opportunity to capitalize on.
At $500 million enterprise value in 2020, Care.com was purchased at 2.2x EV/2020 Revenue. Given the value-added work that IAC has performed on Care.com including adding new services such as instant book, Care.com should be worth more than IAC's cost basis. But realistically, in the current care.com in today's environment, given care.com is still a work-in-progress and margin expansion from 10% has not been a focus by IAC, I doubt anyone would pay a high premium multiple for care.com in its current form. It's difficult to find comps for care.com, but since Feb 2020, multiple for the market has risen and fallen, but now SPY 500 P/S ratio is where it was in 2020 before the pandemic - at around 2x, close to where care.com was purchased in 2020.
At 2x 2023 EV/REV, care.com is worth $740 million in EV, or $8.3 per IAC share.
The rest of Emerging & Other segment is comprised of
- Mosaic Group - a developer and publisher of subscription-based mobile apps including Communications (RoboKiller, TapeACall), Language (iTranslate, Grammatica), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero), Health (Daily Burn, Window - Intermittent Fasting) and Lifestyle (Blossom, Pixomatic);
- Bluecrew - a job search website for hourly-wage based / service related jobs such as bartenders, warehouse specialists, forklift, dishwasher, cook etc.
- Vivian Health - a job search website for healthcare professionals
- The Daily Beast - a news blog
- IAC Films - a movie production company for international and US films
- Newco - the IAC incubator company with a portfolio of ventures in social gaming, telehealth, home services, social media, and online recruiting
Revenue and other figures are not broken out for any of these businesses, but LTM revenue for this aggregate portfolio ending Q1/22 can be back-calculated to be $350+ million, likely half of which I estimate to be revenue from Mosaic Group, as a 2019 article had stated that Mosaic had $123 million in revenue at the time. The 10ks and 10qs also provide a sufficient grounds for the derivation that the emerging & other segment excluding care.com has been growing at single digits y/y in 2021 to 2022.
Extrapolating on this single digits growth rate, I estimate FY2023 revenue for Emerging & Other ex. Care.com at $367 million, roughly equal to that of Care.com. Qualitatively, the revenue at these businesses will be inferior to care.com's revenue since the latter is an established business and the gem of IAC's Emerging & Other segment, so I reason to apply a much lower EV/REV multiple to the the rest of the Emerging & Other, at a de-minimis 0.2x multiple (10% of care.com). This yields to an enterprise value of $74 million, or $0.8 per IAC share for the Emerging & Other segment ex. Care.com.
I value Emerging & Other segment in aggregate at $9.2 per IAC ($8.3/sh for care.com + $0.8/sh for ex. co).
SoTP Valuation
In the final analysis, I value IAC's current NAV at $66.8/sh. This implies IAC is currently trading at ~20% discount to NAV.
In my experience, SoTP stocks generally trade at a 10-30% discount to NAV anyways, so a 25% discount-to-NAV does not present a compelling long opportunity at this level.
However, my NAV is also calculated on what I think each of the assets may fetch at current, realistic liquidation values, as opposed to long term fair values. The public holdings are calculated at current market prices, which are readily available. The private holdings are also calculated based on what I believe the respective assets/company's comparable pubic peers are CURRENTLY trading at. The Cash & Debt are calculated at book values, which are good proxies for liquidation/market value since these net debt, cash, working capital items are quite liquid.
On longer term fair value, the private holdings alone possesses the potential to grow from the current NAV value of ~$40/sh, which is based on public comps multiples that've experienced substantial contraction in 2022, fueled by series of global interest rate hikes and anticipations of economic slow downs. Further, both Dotdash Meredith and Search have been adversely impacted by macro slow down in the e-commerce / ad demand. Dotdash Meredith's post-deal integration delays have also impinged on performance. However, though higher than 0% levels of interest rates will likely remain going forward, the e-commerce / ad market slow downs and Dotdash Meredith's integration issues are in my view likely transient issues that should be resolved over the coming year or two. A lifting of these near-term overhangs should exert positive forces on Dotdash Meredith and other private holdings via multiples expansions and incremental chunks of revenue/EBITDA growth.
To wit, Dotdash and Meredith prior to the merger at Dec 2021 generated a combined EBITDA of $450mm for FY2021. For FY2023, the combined EBITDA by my estimate drops to only ~$260mm before Meredith-related corporate expenses. The significant drop in EBITDA is based on certain assumptions and forward-looking intimations that I've extracted from management's Q3/22 remarks reflecting the sustained ad-market slow down and Dotdash's internal integration issues. Notwithstanding the slow down, I deem it rather unlikely that Dotdash Meredith's EBITDA had peaked in FY2021. The growth prospects of the business is still there, so after integration issues and ad-market slow down, EBITDA should recover, then surpass pre-merger levels of $450mm.
Management has elucidated that at $1 billion in Dotdash Meredith digital revenue, for every $1 in revenue, roughly $0.50 to $0.60 becomes EBITDA, so to grow EBITDA from $200mm in FY2023 to $300mm, revenue would have to grow to $1.2 $1.3 billion, or 20% to 30% from my FY2023 estimate revenue of $980 million. Based on historical Dotdash Meredith growth rate, this can be achieved in 2025/2026. Based on a 10x revenue multiple, Dotdash Meredith would be worth $3 billion or $33/sh by 2025/2026, implying a $10/sh NAV growth over the next 2-3 years from the current NAV of $70/sh.
Other segments such as Turo, Search, Care.com should see similar-in-concept valuation growth over the coming years if the standalone fundamentals of these businesses remain steadfast over a recovering macro environment, so in my view, IAC's private holdings offer a decent NAV growth from the current level, where a confluence of overhangs - consisting of interest rate hikes, macro-slow down in e-commerce/ad market, and IAC post-deal integration delays - has temporarily atrophied IAC NAV to a depressed level amidst the current environment. As these overhangs expectedly dissipate, the future looks brighter, so valuations in my opinion likely to head higher than lower.
Given this NAV growth prospect, IAC's valuation at a 25% discount to its current, depressed NAV doesn't look too shabby, and presents a decent entry point to get involved in the growing NAV story at IAC.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
- Recovering of the digital ad demand, positive for Ask Media, Dotdash Meredith,
- Completion of Meredith content integration onto the dotdash platform.
- IPO of Turo in the next two years before revenue exceeds revenue threshold currently qualifying Turo as an "Emerging Growth Company".
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