Is Match Group a Buy From Here?
With no fundamentally negative news swirling around Match Group (NASDAQ:MTCH), panicking investors are selling MTCH stock. Why? Match shares lost 16% in the last week and are now close to 52-week lows, down by nearly 60% from its $182 yearly high. Blame the 37% weekly sell-off in Netflix (NASDAQ:NFLX), an online streaming giant after it posted a loss in subscribers. Match is guilty by association. Speculators are betting that if people are canceling their Netflix accounts, they will close their dating app, too. Unfortunately, investors need to wait until Match reports quarterly results after the market closes on May 3.
Currently, Match is a better deal than Bumble (NASDAQ:BMBL), depending on the valuation metrics readers choose. Match has a forward price-to-earnings ratio of 23.7 times, below that of Bumble’s 60.6 times multiple. Since neither company has enough debt to weigh on cash flow as interest rates soar in 2022, both firms are free to invest heavily in their respective dating apps. Still, worries remain. Match could post a weak active user count, blaming inflation and a slowing economy. The company may prove the market wrong. For example, the omicron strain is a milder variant of Covid-19. People are more willing to connect with people online and then meet in person. That should increase Match’s quarterly results.
On its last conference call, Chief Executive Officer Shar Dubey said that Hyperconnect’s integration on its platform is progressing. The technology links live video and audio, offering an immersive discovery and live experience for users. In the last quarter, Hyperconnect added around $50 million in total revenue. In the fourth quarter, Match posted revenue of $806.1 million, up by 23.8% year-on-year. It lost 60 cents per share. The firm’s product development cost grew by 31% YOY. But its gross leverage fell to 3.7 times its trailing adjusted operating income. In the period, Match agreed to pay a whopping $441 million to settle its litigation with former Tinder employees and founders.
This year, Match expects to grow its revenue by 15% to 20%. It is confident that Tinder will lead the business with growth in the high-teens. The company will also benefit from Google adjusting its policy that would lower the fees Match pays. As the top app in Japan, for example, Tinder’s uptake should carry Match’s promised growth. The market’s poor memory for Match’s strong prospects suggests that MTCH stock will end its downtrend. It is due for a break-out ahead of its earnings report. This expectation does not come without risk. Match may experience a spillover of the Netflix subscription exodus. If users are disconnecting from online applications, it would undermine this bullish prediction.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
