Market Overview

How Tinder And Plenty Of Fish Make Match Group A Buy

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  • Match Group Inc (NASDAQ: MTCH) shares have lost 6 percent since November 20, from a high of around $16 on that day.
  • Barclays’ Christopher D. Merwin initiated coverage of the company with an Overweight rating and a price target of $17.
  • Headwinds from the transition to mobile are expected to subside, resulting in reacceleration in Match’s revenue growth and margin expansion, Merwin stated.

Analyst Christopher Merwin said, “Online dating has been around since the 90s, and since that time we believe The Match Group - and its growing portfolio of brands - has been the undisputed leader.” He added, however, that in recent years, the shift to mobile has proved to be “a double-edged sword,” since it has led to platforms like Tinder and a “new end market of millennial daters.”

The transition to mobile has also resulted in some conversion challenges for core brands that “weighed on top line growth.” Merwin estimates Match’s core revenue growth to slow to flat y/y in 2015, from 6 percent in 2014.

Now that more than 70 percent of Match's new registrations are on mobile, the headwinds from the transition are expected to subside and core brand revenue growth is likely to stabilize in the low single digits, Merwin commented. He explained that conversion improvements on mobile would drive the reacceleration in top line growth.

Match’s EBITDA margin is expected to expand by 712 bps y/y to 34 percent in 2016, and rise again in 2017 to 37.4 percent. “Even as the mobile transition has caused cost of revenue to increase from iOS and Android platform fees, sales & marketing expense has fallen due to viral user growth on Tinder - and we expect that will continue,” the Barclays report noted.

Merwin added that Tinder could generate $58M of EBITDA in 2016 as monetization ramps, while Plenty of Fish should be able to add $75M of EBITDA in the same year.

Latest Ratings for MTCH

DateFirmActionFromTo
Oct 2019UpgradesPerformOutperform
Oct 2019UpgradesNeutralBuy
Oct 2019UpgradesHoldBuy

View More Analyst Ratings for MTCH
View the Latest Analyst Ratings

Posted-In: Barclays Christopher D. MerwinAnalyst Color Long Ideas Initiation Analyst Ratings Trading Ideas

 

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