IAC Has More Than Tripled From Its March Low—Can It Keep Going After Earnings?

Since briefly dropping below the $40 level in March, IAC (IAC) has rallied at an incredible rate. The stock is now trading over $135. Those prices have been adjusted to account for the stock split that occurred on July 1. The split took place as a means to spinoff Match Group and it was a rather complicated split.

If you aren’t familiar with IAC, it is conglomerate of different media and internet companies around the world. Some of the sites include Angie’s List, Ask.com, HomeAdvisor, and Investopedia.

IAC is set to report second quarter earnings results after the closing bell on Monday. There is a conference call scheduled for Tuesday morning to discuss the results. Because of the spinoff of Match and the other dating sites, it’s difficult to compare past earnings results with the reports going forward.

For the first quarter IAC reported a loss of $2.49 per share. Analysts expect the company to report EPS of $2.12 for the second quarter. This is like comparing apples and oranges and it will be like this for the next year.

Looking at Tickeron’s Screener, the fundamental indicators and the technical indicators are very much at odds for IAC. On the fundamental side the stock gets three negative ratings and one positive rating. We see that the outlook is negative and the stock is overvalued. The Profit vs. Risk Rating is also poor, but the P/E Growth Rating is good.

On the technical side there are three positive readings and not a single negative reading. The RSI generated a bullish signal five days ago, the MACD generated one 10 days ago, and the Momentum Indicator generated a signal five days ago.

If we look at the daily chart for IAC, the rally has been unbelievably impressive. We see very instances where the stock fell for more than a few days in a row and even then the losses were minor. In the last 19 weeks the stock has moved up in 14 of them and down in only five weeks.

The huge run up has led to some pretty optimistic sentiment for IAC. According to the Wall Street Journal there are 17 analysts covering the stock and 13 have the stock rated as a “buy” and one has it rated as a “hold”. This gives us a buy percentage of 94.1% and that is much higher than the average stock.

The short interest ratio for IAC is at 1.71 and that is below average. Like the buy percentage it is indicative of optimism. Because the stock is “new”, the short interest report on July 15 was the first one for the stock so there is nothing to compare it to. It also means that we don’t know if the ratio is trending higher or lower which would tell us if short sellers were becoming more or less optimistic.

Finally, the put/call ratio for IAC is at 0.869 and that gives us a third sentiment indicator that points to more optimism than the average stock. There are 4,941 puts open and 5,685 calls open at this time. That isn’t a great deal of open interest for a stock that sees 3.7 million shares change hands each day.

To me, the overall picture for IAC is muddled. The technical indicators suggest that the stock could continue its rally, but the fundamental indicators suggest that the stock may struggle over the long term. The overly optimistic sentiment indicators are a concern as well. If IAC should disappoint investors with the earnings report on Monday, we could see a huge decline. The expectations seem to be pretty high and that means the hurdle the company needs to clear is high as well.