IAC: Is it Time to Buy Puts? AI Bearish Signal

IAC's short-term outlook is bearish. The primary driver is the significant earnings miss reported on November 3rd, with a Q3 EPS of $(0.27) missing estimates by a substantial margin. Sales also fell short of expectations. This double miss creates negative sentiment, likely pressuring the stock downwards over the next 1-2 weeks. Adding to the negative outlook, Keybanc lowered its price target on IAC from $45 to $41, despite maintaining an Overweight rating. While an Overweight rating suggests long-term confidence, the price target reduction reflects near-term concerns, possibly linked to the earnings miss. The combination of poor earnings and a reduced price target outweighs any potential positive sentiment. The communication services sector movement is unlikely to offset the direct company news impact. Options traders should consider bearish strategies.

IAC's technical outlook is bearish, warranting caution. The stock price has declined significantly over the past 90 days, from approximately $41.12 in late July to $32.01 as of November 4, 2025. The 21-day EMA at 33.25 and the 50-day SMA at 34.71 are both trending downwards and situated well above the current price, confirming the downtrend. The 200-day SMA, while present, is also above the current price indicating significant overhead resistance. Momentum indicators support the bearish narrative. The MACD is negative (-0.628), with the MACD line below the signal line, and the MACD histogram is negative, signaling bearish momentum. The RSI is 41.65, indicating that the stock is not yet oversold but trending in that direction. Stochastic Oscillator values are low (29.70k and 22.34d), implying oversold conditions, but this may only provide a temporary bounce. Recent price action reveals a sharp drop with minimal signs of reversal. Overall, the technical indicators suggest continued downward pressure on IAC's stock price in the short to medium term. The ADX is 18.45 suggesting the trend has strength.

IAC's management discussion reveals a challenging operational landscape. Total revenue decreased by 8% to $589.8 million for the three months ended September 30, 2025, compared to $642.0 million in the prior year, and similarly decreased 8% to $1.75 billion for the nine months ended September 30, 2025, compared to $1.9 billion in the prior year. This decline was primarily driven by a 41% decrease in 'Search' revenue to $51.9 million for the quarter and $114.6 million for the nine months, attributed to Google's algorithm changes impacting affiliate partnerships. 'People Inc.' revenue also saw a decrease of 2% to $429.8 million for the quarter. Adjusted EBITDA experienced a significant drop of 59% to $29.1 million for the quarter, but increased 8% to $131.4 million for the nine months. Net cash provided by operating activities attributable to continuing operations decreased significantly to $27.5 million for the nine months ended September 30, 2025, compared to $124.2 million in the prior year, reflecting changes in working capital including a decrease in operating lease liabilities of $78.6 million. The company is addressing cost structure, as evidenced by severance-related costs incurred during the quarter and the surrender of certain office spaces which resulted in net gains of $5.2 million and $41.5 million for the three and nine months ended September 30, 2025, respectively.

The IAC second quarter earnings call struck a moderately bullish tone, emphasizing growth in key areas despite facing some headwinds. People Inc., formerly Dotdash Meredith, reported 9% digital revenue growth, accelerating from 7% in Q1, driven by a strategy focused on diversifying audience sources beyond Google. CEO Neil Vogel highlighted the 'Google Zero' approach, stating, 'What happens if Google no longer sends us traffic? Well, I think we're going to be very healthy.' This diversification includes investments in email, events, syndication, and off-platform audiences on Apple News, YouTube, Instagram, and TikTok. While digital EBITDA margins at People Inc. were essentially flat year-over-year at 24%, CFO Christopher Halpin attributed this to strategic investments in new products, technology, and channels, expecting a return on these investments in the coming quarters. MGM also reported strong results, particularly BetMGM with 36% net revenue growth and increased full-year guidance. Care.com relaunched its product and brand, showing 'promising signs across engagement metrics' after a period of consumer revenue erosion. Overall, IAC tightened its full-year adjusted EBITDA guidance to $247 million to $285 million, while People Inc. reiterated its full-year digital revenue guidance at 7% to 10% but lowered the high end of its adjusted EBITDA guidance from $350 million to $340 million, citing increased spending and healthcare costs.

IAC's financial performance presents a mixed picture over the analyzed period. Revenue has fluctuated, starting at $929.7M in Q1 2024, peaking at $1.06B in Q4 2023, and then declining to $589.8M in Q3 2025. Gross profit margins have been similarly inconsistent, ranging from a high of 0.73 in Q4 2024 to a low of 0.56 in Q4 2023, with the most recent quarter showing a gross profit ratio of 0.65. Operating cash flow has also been volatile, with Q3 2025 showing $32.9M in operating cash flow, a significant improvement from the negative -$5.5M in Q2 2025. Total debt decreased from $2.49B in Q4 2023 to $1.46B in Q1 2025, and then decreased significantly to $0 in Q3 2025, indicating improved solvency in the latest period. However, net income has been inconsistent, with significant losses reported in several quarters, including -$216.8M in Q1 2025 and -$21.9M in Q3 2025. While debt has decreased, the inconsistent profitability and volatile cash flow raise concerns about the company's overall financial stability and future performance.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.