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IAC Interactive Downgraded to a “Sell” at Goldman Sachs (IACI)

Posted: 12/4/2012 9:06:00 AM
Referenced Stocks: AOL;DMD;IACI

Goldman Sachs reported on Tuesday that they have downgraded internet company, IAC Interactive Corp.( IACI ).

The firm announced that they have downgraded IACI from "Neutral" to a "Sell," and have lowered its price target from $53 to $42. This price target suggests a 8% decline from the stock's current price of $45.50.

Analysts predict that increased buying from Ask could pressure margins. Additionally, since AOL, Inc.( AOL ) and Demand Media Inc. ( DMD ) had similar arbitrage goals in their third quarter, the other companies may threaten the strategy of IACI.

An analyst commented, "we believe the risk for IAC of increasing keyword competition or a Google policy change on arbitrage is significant as it derives 52% of its revenue and 65% of OIBA as of 3Q from search and the comparisons of mid-to-high 40% revenue growth for each of the past three quarters are not only difficult but a major outlier within the overall search market growing high teens," the analyst comments.

IAC Interactive shares were mostly flat during premarket trading Tuesday. The stock is up 10.73% YTD.

The Bottom Line
Shares of IAC Interactive Corp. ( IACI ) have a 2.04% dividend yield, based on last night's closing stock price of $47.17. The stock has technical support in the $42-$44 price area. If the shares can firm up, we see overhead resistance around the $50-$51 price levels.

IAC Interactive Corp.( IACI ) is not recommended at this time, holding a DARS™ Rating of 3.3 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .