IACI Q3 2013 Earnings: Market Overreaction To Revenue Miss

Interactive Corp (NASDAQ: IACI), one of our top stock picks(click here to see), announced its quarterly results after market hours on Oct 29. We take a look at the company’s Q3 2013 performance and our outlook on the stock.

Interactive Q3 2013 performance

IACI Q3 2013 earnings

The company saw a 6% Y/Y increase in its topline compared to the year ago quarter. The growth rate in revenues was far lower than the 13% analyst’s estimated. The market response to the topline miss had been a 13.6% fall in the stock price in after-hours trade following the earnings call. However all was not bad about the company’s quarter.

The quarter saw margin expansions at the company with the operating margins jumping 5 percentage points and the Net Income margins increasing by 7 percentage points. The increase in the profit margins compensated for the decrease in the topline growth rate; hence the earnings of the company were not impacted adversely. The GAAP earnings per share saw a 163% Y/Y jump whereas the Non-GAAP earnings jumped by 82% compared to the year ago quarter. The earnings-per-share (EPS) beat Street insider’s consensus analyst estimates of 95 cents by a whopping 35%.

The stock closed the last trading session on October 29th at a price of $57.90 registering a one day gain of 1.54% before falling 13.6% in after-hours trade following the earnings call. The pre-market trade saw the stock fall further with the price at $49.50 on 30th October before the market opening bell.

We believe there has been an overreaction in the market due to the revenue miss. We had added the stock to our top stock picks on May 22nd when it was trading at a price of $50.47. Till yesterday it had returned 14.72% since our first coverage of the stock. We continue to believe in the long term potential of this company as we value its ability to grow its earnings. The huge fall in the stock price will see its price-to-earnings (P/E) multiple drop to sub-20 levels making the stock more lucrative as a long term investment.

To see InterActive Corp’s current stock price, please click here: (NASDAQ: IACI)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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