Axiom: Time To Buy Match Group's 20%

• Shares of Match Group Inc MTCH are up 16 percent since their debut on November 19.
• Axiom’s Victor Anthony initiated coverage of the company with a Buy rating and a price target of $18.
• The company’s shares trade at a discount to the internet peer group and have a favorable risk reward, Anthony mentioned.

Match Group is a leader in the online dating space, with 4.7 million paying subscribers and a quarter of the industry’s revenues and ownership of Tinder, a leading online dating app.

Analyst Victory Anthony believes that the company is poised to benefit from its multi-brand approach, pricing power at the larger brands and declining per unit customer acquisition costs.

Match Group’s robust cash flow generation is also a major strength, the analyst stated, while adding that Tinder could drive $95-105 million of the company’s annual EBITDA in view of its subscribers, ad load and margins.

There is a huge advertising opportunity across the brands and could contribute incremental revenues of about $55-230 million over time. Anthony expects Match Group’s dating EBIDA margins to expand by 600 bps from 32.7 percent in 2015 to 38.9 percent in 2017.

The company’s FCF margins are also expected to increase from the mid-teens in 2015 to mid-20 percent in 2017-18.
Competition and Tinder Cannibalization are the two risks facing the company, Anthony mentioned while adding that they are manageable.