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Jefferies Upgrades Match Group, Says Facebook Poses Little Threat

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Jefferies Upgrades Match Group, Says Facebook Poses Little Threat
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Investor concerns that Facebook, Inc. (NASDAQ: FB)'s new dating service will negatively impact Match Group Inc (NASDAQ: MTCH)'s longstanding dating platforms could be overblown, according to Jefferies.

The Analyst

Jefferies' Brent Thill upgraded Match Group from Hold to Buy with a price target lifted from $40 to $50.

The Thesis

From a historical point of view, Facebook has had minimal success when it offered a complementary or new service such as payments, marketplace, food delivery and reviews, Thill said in a Monday note. (See the analyst's track record here.) 

Investors may expect a similar outcome from its new dating platform for one key reason: many social media users are unwilling to mix their online dating with social media, the analyst said. 

The analyst said his assumptions are consistent with the findings from a survey of 600 online daters. Among those surveyed by Jefferies, only 43 percent of users said they will definitely use Facebook's dating platform, but the majority will use it as an "additive product" instead of a replacement. In fact, 60 percent of those surveyed already use more than one dating app.

 Match Group's dominance among millennials will likely continue, and Facebook could see success among the older demographic that platforms like Tinder typically don't cater to, Thill said. Facebook could theoretically seek out an acquisition of a rival platform, which may create risk to Match Group's business, the analyst said. 

Absent any M&A deals, Match Group should be able to grow 2018 revenue by 26 percent, with a double-digit growth profile forecast through 2022, Thill said. The company should show a 40-percent-plus long-term EBITDA margin, which is an "extremely rare" accomplishment within the mid-cap internet space, the analyst said. 

Jefferies' survey results should make investors "more confident" in Match Group's ability to execute in the dating space despite Facebook's entrance, Thill said. 

Price Action

Shares of Match Group were trading higher by 4.4 percent at $43.35 at the time of publication Monday. 

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Photo courtesy of Tinder. 

Latest Ratings for FB

DateFirmActionFromTo
Nov 2018ArgusMaintainsBuyBuy
Oct 2018Morgan StanleyMaintainsOverweightOverweight
Oct 2018Raymond JamesMaintainsOutperformOutperform

View More Analyst Ratings for FB
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