Earnings will be released on July 31. That will be an important trigger for IACI. In the last quarter, revenues had increased by ~16% and the net income had gone up by 55% on yoy basis. However, the revenues had declined by 3% sequentially. The stock has already appreciated by 37% from the 52 week low in January, and it is important that the fundamentals catch up quickly. The earnings need to deliver positive surprises, otherwise there may be a bit of correction. The recent rise in the stock has stretched the valuations a bit as the trailing P/E is now around 27. The forward P/E is around 11 and the PEG is 0.44, which indicates that there are expectations of good growth in the net income over the next few quarters / years. Since the expectations are high, there is little room for slippages. Going by the recent track record of the company, the fundamental growth story is likely to continue. The revenues have doubled since 2009, and the bottomline has improved significantly. In 2009, the revenues were $1.35 billion, while in 2012, the company recorded a revenue of $2.8 billion. In 2009 the company posted a net loss of $978 million, while it recorded a profit of $159 million in 2012. Future growth may come from new segments/ businesses, and the company can be expected to foray into new arenas. It has recently invested in DraftStreet which is involved in daily fantasy sports. This segment is likely to show tremendous growth over the next few years, and several big and small players, like Yahoo (YHOO), Comcast (CMCSA) and MGT Capital Investments (MGT), have invested in fantasy sports recently. Comcast has invested $11 million in Fanduel.com and MGT has invested in Fanthrowdown.com. If IACI delivers a good set of numbers, the recent up trend in the stock may gain strength.
