What happened
Week to date, shares of IAC(NASDAQ: IAC) were down 13% as of 10:46 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.
The holding company reported lower revenue in the second quarter than analysts anticipated, which weighed on the shares this week.
So what
The company started to see weakness in revenue in the fourth quarter of last year, and it's still struggling through a challenging business environment. The Dotdash Meredith segment, including results from People, Food & Wine, and Southern Living magazines, as well as its Angi home repairs business, reported double-digit year-over-year declines in revenue.
However, the silver lining of the quarter was improving profitability. After falling 25% year over year in the first quarter, the company's operating loss narrowed in the second quarter, improving by 67% year over year.
The stock was up over 45% year to date going into the quarterly report, so investors had high expectations for better results.
Now what
IAC is continuing to deal with a soft advertising market, but that will turn around eventually, which could make the stock a promising contrarian investment. The shares are trading at a cheap price-to-sales (P/S) ratio of 1.
The stock traded at a high P/S multiple of around 4.5 when IAC was reporting robust revenue growth during the pandemic. IAC may never grow revenue close to 40% again, but the stock is likely undervalued when averaging out how its media and home services business can perform through all economic cycles.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
