No longer is online dating the last-ditch resort for frustrated, introverted singles.
It has become a massive, mainstream phenomenon. And the number of users who are signing up for digital dating applications is growing worldwide.
This puts Match (MTCH) – Get Report in a sweet spot for investors with its enviable portfolio of more than 45 brands, including BlackPeopleMeet, FriendScout23, Match.com, Meetic, OkCupid, OurTime, PlentyOfFish, Tinder and Twoo.
Since its initial public offering in November, the stock has gained more than 18.75%. And so far, the earnings performance of the company has been largely solid.
The company is slated on Tuesday to report second-quarter earnings of 16 cents a share on revenue of about $295 million.
Match’s first-quarter earnings beat Wall Street’s projections, as did revenue of $285.28 million, which was a 21.4% year-over-year rise.
The company projects 2016 dating revenue of $1.1 billion to $1.14 billion and expects non-dating revenue to rise slightly from 2015 levels of $112 million, in line with analysts’ expectations.
Along with the company’s acquisition of PlentyOfFish, Tinder’s growth has given the company’s business a boost. Tinder has witnessed its paid membership count top 1 million.
Over the next five years, annual earnings are projected to fall a bit shy of Match’s 16% run rate. The company is profitable and is free cash flow positive ($213 million for the trailing 12 months), demonstrating that the business is on course and ready to keep moving forward.
The addressable market opportunity is huge, and with 1 million paid members, Match hasn’t even scratched the surface of Tinder.
Sure, hiccups such as sexual harassment and discrimination lawsuits with a former executive have cropped up and been settled, but that hasn’t slowed this well-oiled machine down.
Every single brand in Match’s portfolio caters to a different milieu and, more importantly, an unmet demand for dating. That makes the stock a superb long-term holding.
Another benefit is Match’s ability to scale up brands. Match.com, OKCupid and Tinder have all grown.
Globally, 8,000 online dating websites and applications are introduced every year, but just a handful are successful. Match’s properties have largely been among the lucky ones.
Match’s network-building approach has worked wonders. Like other social-media powerhouses Match has essentially created a large network.
And Tinder has seen massive growth in countries such as China and India.
Although there is no denying the possibility that new online dating services could challenge Match’s offerings, innovation will help should keep would-be rivals at bay.
At 16.42 times forward earnings, Match shares aren’t exorbitantly priced. The five-year expected price-earnings-growth ratio stands at 1.35, which is not expensive by any measure.
The business is unique, but there isn’t a fancy premium attached to it.
Match, with its inimitable business model and proven ability to scale and enhance online dating brands and generate excess cash, is a solid investment option.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.