Based in Dallas, Texas, Match Group, Inc. (MTCH) provides dating products worldwide. The company pioneered the concept of online dating over 20 years ago. Its portfolio of brands includes Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyofFish, and OurTime. MTCH’s products are available in more than 40 languages to users worldwide.
Although the company received a minor setback with the onset of the global COVID-19 pandemic, its recovery began May and has continued since with growth in its subscriber totals. Average subscribers increased 12.3% year-over-year to 10.8 million for the third quarter (ended September 30, 2020). Its Average Revenue per Subscriber (ARPU) also increased 5% year-over-year to $0.62.
The company’s success with Tinder is well documented. It is ranked #1 in downloaded dating apps worldwide. MTCH’s non-Tinder portfolio has also showed promising results. The stock has gained more than 49% over the past three months to close yesterday’s trading session at $153.39. A portfolio of products that target various demographics and a potential upside based on several factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates MTCH:
Trade Grade: A
MTCH is currently trading significantly above its 50-day and 200-day moving averages of $140.92 and $113.67, respectively, indicating an uptrend. Moreover, MTCH has gained 11% over the past month, reflecting a short-term bullishness.
The company’s top line has increased more than 18% year-over-year to $639.8 million for the third quarter ended September 30, 2020. Operating income has increased 14.2% year-over-year to $200.2 million. And total direct revenue, which accounted for nearly 98% of total revenue, increased 18.3% year-over-year to $628.3 million. While Tinder direct revenue increased 15% year-over-year, non-Tinder brands collectively increased direct revenue by 23%, driven by growth in ARPU.
On December 7, the company announced a partnership with Rape, Abuse & Incest National Network (RAINN), the nation’s largest anti-sexual violence organization, to conduct a comprehensive review of sexual misconduct reporting, moderation, and response across MTCH’s dating platforms, and to work together to improve current safety systems and tools.
In a move to increase its user engagement, MTCH teamed up with Megan Thee Stallion in December for a ‘Put Yourself Out There’ Challenge to push members to create more authentic profiles. The top 100 members that participate in the challenge will each receive a prize of $10,000.
In July, Jim Lanzone was appointed as the CEO of Tinder.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, MTCH is well positioned. The stock is currently trading 3.8% below its 52-week high of $159.53, which it hit on December 17.
Driven by product innovation and improved targeted marketing, the company’s net revenue has grown at a CAGR of 16.4% over the past three years. While EBITDA increased at a CAGR of 39.6% over the same period, EPS increased at a CAGR of 5.5%.
Peer Grade: A
MTCH is well positioned in the Internet industry. Other popular stocks in the internet group are Expedia Group, Inc. (EXPE), Twitter, Inc. (TWTR), and Booking Holdings Inc. (BKNG).
With a 49.1% gain, MTCH has comfortably beaten the returns of these popular industry participants over the past three months. EXPE, TWTR, and BKNG have gained 37.6%, 20% and 28.2%, respectively, over the same period.
Industry Rank: A
The Internet industry is ranked #15 of the 123 StockNews.com industries. The companies in this industry participate in numerous online business areas, including content, auction exchanges, e-commerce sales, and advertising sales.
Most of the companies in the industry had to undergo a rapid digitalization to stay afloat amid the pandemic. With people confined to their homes, companies also turned to t innovative methods and advanced technologies to reach the consumers. This industry is expected to continue to grow even after the pandemic due to the change in consumer behavior.
Overall POWR Rating: A (Strong Buy)
Overall, MTCH is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
With continuing product innovations, MTCH has the potential to gain in the coming months despite climbing more than 49% over the past three months, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.
The consensus revenue estimate of $2.84 billion for the next year represents an 18.5% increase year-over-year. MTCH’s earnings surprise history looks impressive, with the company missing the consensus estimate in just one of the trailing four quarters. Its EPS is expected to grow at 18% next year.
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MTCH shares were trading at $152.75 per share on Thursday morning, down $0.64 (-0.42%). Year-to-date, MTCH has gained 44.55%, versus a 16.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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