Jefferies Swipes Right On Match Group, Says Tinder Is The Asset To Watch

Accelerating Monetization At Tinder

Analyst Brian Fitzgerald noted that Tinder's paid member count has more than doubled since the fourth quarter 2015 IPO. "We believe PMC (1.8 million ending PMC as of 4Q16) is still underpenetrated as a percent of MAU (est ~25 million to ~30 million), providing ample conversion opportunity," the analyst said.

The analyst sees additional means for monetization in Tinder's a la carte options and indirect (ad) revenue.

Specifically, the analyst estimates 2017 Tinder average paid member count of 2.2 million, representing 74 percent year-over-year growth, and Total Tinder revenue of $306 million. Match's classic brands such as Match, OkCupid and Meetic would return to growth in 2017, the firm added. The firm is above-consensus on Match's PMC growth for 2017, with the estimate of 16 percent to 6.2 million.

Favorable Industry Tailwinds

Jeffries believes industry tailwinds within online dating are favorable, with one of three dates in the United States beginning with an online dating product. The firm estimates Match's addressable market is 511 million, taking into account singles who are online. This number is expected to increase to 672 million by 2019.

Going by the fact that only 59 million of the 511 million singles online use Match products and only 5.7 million, or less than 1 percent of the TAM are paid users, the firm sees a strong opportunity for continued penetration.

The firm also feels untapped mobile advertising opportunity provides additional upside.

For 2017, the firm estimates about 60 million in ad revenues, representing 19 percent year-over-year growth.

"Bears may point to increased competition within mobile dating, but given Match's operating history and significant advantage in regards to resources and industry knowledge, we believe they remain well positioned," Jeffries concluded.

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