Everyone on this board knows that long-term, I am quite bullish on IACI. I am a fundamentals investor, and like their growing strength (and strategy, and execution) in some of the most important sectors in interactive e-commerce that have the wind at their back.
Based on four different valuation models, my own price target is that IACI will trade in the range of $48-$59 within 12-36 months. As a longer term investor, I am quite satisfied and comfortable holding my long position for that range. I am not predicting, however, that this range will necessarily be seen in the next month or two.
I do not maintain that short-term, the stock cannot go below current levels. I think it very well can. I am NOT a technical trader and the vast majority of my investments are made on a 1 year minimum holding period.
We are headed into Sept/Oct, traditionally two of the weaker trading months of the year. Very recently, IACI has indeed generally lagged more than led the market over the past few weeks. Generally balanced-to-favorable articles/news (e.g., Barrons) have not resulted in much upward motion. There is an overhang of the Vivendi issue, which, once settled, should be quite positive for IACI, but it's unclear right now how quickly, and at what price point, this will change.
That said, IACI's underlying businesses are growing very rapidly. Cashflow is extremely impressive. IACI's cashflow, net of all outlays and inflows, is greater than AMZN, EBAY, and YHOO combined. Earnings are dragged down by large amortizations related to the Vivendi transaction.
So, while I am holding for the high $40's / mid-50's, and expect with confidence that to arise within 12-36 months, I don't necessarily think the immediate days and weeks are likely to go through the roof.
(Based on similar valuation models, I set a price target of $45 for EXPE in 2003, which was laughed at by most shorts on the EXPE board, but then exceeded by more than 40% in the months that followed, after a short dip. Not saying it will be repeated -- simply offering some history here... online travel, and EXPE/ROOM in particular -- are growing far faster than most people realize.)
But the point of my post is this:
If I were to place a bet, I'd say that short-term shorts AND long-term longs will both be right, when measured over the coming two years.
"We are headed into Sept/Oct, traditionally two of the weaker trading months of the year. Very recently, IACI has indeed generally lagged more than led the market over the past few weeks. Generally balanced-to-favorable articles/news (e.g., Barrons) have not resulted in much upward motion. There is an overhang of the Vivendi issue, which, once settled, should be quite positive for IACI, but it's unclear right now how quickly, and at what price point, this will change."
Just became short-term long@35,and would be interested to hear your views on V/IACI issue.
>> would be interested to hear your views on V/IACI issue.
Here are my thoughts...
By all press accounts, Vivendi is trying to choose between GE/NBC and Bronfman's bid.
A GE/NBC combination is rumored to not involve much cash up front. For IACI, the downside is they would probably get securities in the newly created joint NBC venture. Ideally, they would be cashed out beforehand, but it is hard to say what GE is offering.
A Bronfman bid seems to only have the benefit to Vivendi of a large cash position (rumored to be north of $8 billion), which helps V cancel out some of its debt, and would likely be more beneficial to IACI in the short term.
Diller is likely to argue, IMO, that Vivendi owes IACI securities and/or cash in excess of $2 billion. The Bronfman bid might provide enough cash to go around. The GE bid is likely to prolong the asset swap issue.
On the other hand, if a GE/NBC/VUE joint venture is formed, it is far more likely to dangle a few goodies in front of Diller just to get his consent. NBC could offer a lot more free advertising to IACI over the long run, as well as all kinds of product placement promotion, etc.
In a phrase -- it is all hard to say. All of this is going on behind closed doors. In general, a GE/NBC bid would probably increase *longer-term* value to IACI (if you believe as I do that GE management is quite strong), but short-term it might only transfer securities into a security in the new firm. In the short-run, a cash-heavy Bronfman bid might be more beneficial to IACI but longer-term, it might be less attractive.
Then, there is the further matter of VUE holding a large stake in IACI, in addition to IACI holding a large stake in VUE. (This complicated -- overly complicated, IMO -- asset-swap transaction appeared to result from Diller's desire not to incur a large taxable gain on the sale of USA Network & Sci Fi Channel to VUE).
Since Diller has strings attached -- both personally owned and IACI-owned, and since he contributed the assets of perhaps strongest value to GE/NBC, I'd put the odds at more than 50% likely that IACI/Diller come out with some kind of extra benefits if a cash-low GE/NBC bid gets pursued. Only time will tell.
It does seem like Vivendi is a willing seller, and at least two willing buyers are reaching close to the price point that Vivendi wants. So I do expect some kind of transaction to occur within 3-6 months.
To me, the biggest positive of such a VUE sale wouldn't be purely in the pricetag. It would be the fact that it would allow and force IACI to further clarify its complex reporting. I would be happy to have IACI take a small hit on VUE valuation (e.g., selling it for $2 billion instead of the $2.4 billion Diller wants) to have that happen in the long run.
Jeff, the technical indicators are showing a down trend starting to take shape. See my earlier post titled "IACI technical weakness".
Why would you want to advocate holding the stock for a very likely 20-30% depreciation? Based on technical and historical trends this stock is headed to 28-30 in the short to mid-term, regardless of fundamentals (which are evidently not as important to the price as you seem to think they are).
>> Why would you want to advocate holding the stock for a very likely 20-30% depreciation?
Because many of us pay attention to the possibility of greater returns by holding through it, AND short-term swings due to micro-events are much harder to predict than longer-term price points due to macro-trends and execution.
Second, taxes (short vs. long term) generally serve to make short-term trading par less profitable, on average. Especially now that the long-term capital gains tax was cut by 25%.
Longs getting extremely nervous and coming up with ridiculous reasons why they refuse to cut this one from their portfolios.
It is simply amazing that the stubborn longs who admitedly know the stock is headed lower are still holding because of extreme mental conditioning (brain washing) they received from Wall Street and the management of these companies who will say anything to keep the ponzi scheme going.
Just amazing ...
Reza, I believe you are the one who is being dogmatic.
Here's the record on straight plays (i.e., not leveraged -- either straight buys or short-sales):
Long-term longs: Up over 100% on IACI so far this year
Short-term shorts: Up about 30% on IACI so far for the past month
Short-term longs: Down about 30% on IACI
Long-term shorts: Down about 100% on IACI
... What I am saying is that, depending upon the timeframe of holding, you and I can both be right. We certainly have been in the past four weeks. I am suggesting that may continue for another month or two as we head into autumn.
Time will tell.