IAC Interactive: Set for a Breakout?

08/20/2013 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured stock under accumulation is an internet publishing firm; the stock is in a good technical position to breakout at any time, says Leo Fasciocco, editor of Ticker Tape Digest.

With annual revenues of $3 billion, IAC Interactive Corp. (IACI) has 50 Internet brands serving consumer audiences in 30 countries.

The company's mission is to harness the power of interactivity to make daily life more productive for people all over the world. Its brands include: Ask.com, Citysearch.com, and excite.com.

The stock has advanced from $42 in March to a peak near $52 in May. It then formed a double bottom base. It broke out in June, but then faded back. The stock is now regrouping and we see it setting up for another breakout attempt.

The stock's accumulation and distribution line is lagging; it took a hit in late July, when the stock fell back on heavy volume. However, the key now is that volume in recent days has contracted. That should indicate a dry-up of selling.

This year, analysts are forecasting an 82% jump in earnings from the year before. The current estimate on the Street is at $3.43 a share, up from $1.89 a year ago.

Going out to 2014, earnings should climb 17% to $4 a share from the anticipated $3.43 this year.

Net for the upcoming third quarter is expected to leap 75% to 82 cents a share from 47 cents a year ago. Then the fourth quarter should show an acceleration in earnings growth with net leaping 108% to $1.02 a share from 49 cents the year before.

The past two quarters, IACI has surprised on the upside topping the Street estimate by 2 cents a share and 21 cents a share.

Institutional sponsorship is excellent. The largest fund holder is 5-star rated John Hancock Disciplined Value Fund with a 1.8% stake. It was a recent buyer of 76,630 shares.

One of the largest fund buyers recently was 3-star rated Vanguard Explorer Fund which bought 71,100 shares.

We suggest accumulation of a partial stake in IAC Interactive now, with further buying to be done on a breakout over $52.40.

We are targeting the stock for a run to $65 after a breakout. A protective stop can be placed near $48 after a breakout, giving it some room.

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