Vimeo stock has potential despite its disappointing market debut
Vimeo Stock: Another bird has left the nest for IAC Interactive. Vimeo, the video-creation platform, debuted on the stock market May 25. Vimeo is now the 11th company taken public by IAC (NASDAQ:IAC) in a spin-off.
ELI5: A spin-off is the separation of a business unit/subsidiary into a standalone company – trading with its own ticker in the stock market.
IAC Interactive: The parent to your favorite brands
IAC owns over 150 companies in the media internet space – including Investopedia and HomeAdvisor. Some of the other big-name companies spun off by IAC include…
- Match (NASDAQ:MTCH), the online dating service, up 38% since its July 2020 spinoff.
- Expedia (NASDAQ:EXPE), the online travel booking site, created by IAC in 2001 and spun off in 2005.
In 2006, IAC acquired College Humor for $26m and Vimeo was a part of the package. 15 years later, that investment turned into an $8b company – becoming a homerun for IAC.
IAC’s next child to go public, Vimeo stock
In 2018, Vimeo pivoted from being a Youtube-like streaming service into a video creation tool — which paid off during COVID. Vimeo benefited from the lockdown as people turned to video services to virtually connect — resulting in a strong year:
- $89.4m sales in the first quarter of 2021, up 57% from Q1 2020.
- $3.3m net income in the first quarter of 2021, up from $20.3m net loss in Q1 2020.
Despite the promising numbers, Vimeo stock fell 13% on its Tuesday trading debut. To make things worse, the company expects its growth to slow to 30% in 2021. But it’s not all bad. According to Vimeo:
- Majority of its customers are small businesses — many of which were shut down during the pandemic.
- Sales is expected to speed up again in 2022 from investments made this year.
Upon going public, Vimeo was valued 3x more than what it was 6 months ago — so if investors are looking for something to blame for its drop, blame it on the valuation.
For investors: A good time to be a video company
With expectations for the online video platform industry to expand 21% annually through 2028, Vimeo’s growth is coming at a good time – the question is, can they capitalize on it?
That depends. While Vimeo’s financials are strong, its fate falls on the adoption of its video platform by businesses/consumers – and the demand for video platforms post-COVID.