) to neutral from outperform.
Analyst Heath Terry says until the Internet media and travel giant's long-term strategy begins to show results, he sees InterActive trading in line with the broader Internet group. He says the 22 cents second-quarter adjusted earnings per share is in line, and the $1.501 billion in revenue missed his $1.611 billion estimate. Terry notes the 55.1% gross margin missed his 55.9% estimate, too. Management cut the guidance from $1.0 billion to $1.2 billion in 2004 operating income before amortization to $1.0 billion.
Terry says the main factors were weakness in Hotwire, international travel, Home Shopping Network Germany, higher marketing costs, slower-than-expected growth in Personals, and lower conversion trends at Hotels.com. Terry cut the $42 target to $29, and cut the 97 cents 2004 adjusted earnings per share estimate to 90 cents.