Markets

What Will You Miss Out On by Overlooking Match Group Stock?

Match Group, Inc.MTCH has demonstrated impressive price performance over the last two years. The stock, which was valued at $13 at the beginning of 2016, now currently trades close to $50, reflecting an almost four-fold jump.

Notably, the company has gained approximately 10.6% since it reported second-quarter fiscal 2018 results on Aug 7. Year to date, shares of Match Group have returned approximately 61.1% against the industry 's decline of 5%. In the same period, the stock has outperformed S&P 500 index's rise of 9.1%.

The outperformance can primarily be attributed to the company's Tinder offering's robust revenue growth. We note that Match Group recorded a positive earnings surprise of 1.7% in the trailing four quarters.

Let's delve deeper and analyze the factors driving Match Group's robust quarterly performances.

Robust Adoption of Tinder: Key Catalyst

Strong product portfolio comprising Tinder, Match.com, OkCupid, Meetic, PlentyOfFish and OkCupid are aiding Match Group's top-line.

Tinder has been the key catalyst behind the company's year-over-year revenue growth. Revenues from Tinder soared 136% year over year during the second quarter. Tinder average subscribers increased 81% year over year and came in at 3.8 million. This marked an increase of 299,000 sequentially and 1.7 million year over year.

Better-than-expected renewal rates for Gold remain a positive. Average Revenue per Subscriber ("ARPU") in Tinder grew 33% year over year, primarily due to Gold adoption and a la carte revenues from subscribers.

Upbeat Q2, Raised FY18 Outlook

Match Group's second-quarter revenues were up 36% year over year to $421.2 million and beat the Zacks Consensus Estimate of $413 million. Excluding the impact of foreign exchange currency revenues came in at $413.5 million.

In fact, the increase marked the highest quarter-over-quarter revenue growth since the IPO. Year-over-year growth was primarily driven by increase of 27% in average subscriber base and rise of 8% in ARPU.

The company reported non-GAAP earnings of 41 cents per share surpassing the Zacks Consensus Estimate by 5 cents. The figure increased more than two-fold from the year-ago quarter.

Match Group, Inc. Revenue (TTM)

Match Group, Inc. Revenue (TTM) | Match Group, Inc. Quote

Backed by the impressive results, the company has issued an upbeat outlook for the third quarter as well as raised guidance for full fiscal.

Match Group anticipates fiscal third-quarter 2018 revenues to be in the range of $430-$440 million. The Zacks Consensus Estimate is pegged at $437.8 million reflecting a year-over-year growth of 27.5%.

For fiscal 2018, Match Group now anticipates revenues in the range of $1.68-$1.72 billion (previously $1.6-$1.7 billion). The positive outlook was driven by Tinder's better-than-expected Gold and renewal rates. The Zacks Consensus Estimate is pegged at $1.72 billion, in line with the higher end of guided range, translating to a year-over-year growth of 29.3%.

Buyouts Propelling Top Line

Acquisitions have always been one of Match Group's key growth strategies.In the second quarter, Match Group acquired 51% stake in Hinge, the NY-based "relationship" app.

Given the essential difference between "casual dating and hook-ups" and "meaningful relationship", we believe this move will enable the company to explore a new relationship space. The addition to the portfolio bodes well, since it provides the users with increased options. In fact, the millennial individuals looking for a purposeful relationship can find solace in the company's new offering.

Similarly acquisitions like Plenty of Fish (July 2015), Eureka, Inc (May 2011), Ok Cupid (February 2011), Singles Net (February 2010) and People Media (July 2009) have aided growth by expanding its product portfolio and adding competence.

We expect the acquisition synergies to continue driving Match Group's top-line performance in the quarters ahead.

Encouraging Estimate Revisions

Over the last 30 days, fiscal 2018 estimates were revised, driving the Zacks Consensus Estimate to $1.39 per share from $1.36 per share. The figure reflects year-over-year growth of a whopping 85.3%.

Further, the company has a long-term expected EPS growth rate of 12.5%.

To Conclude

Match Group is considered to have pioneered the concept of online dating, which is why it enjoys a first mover's advantage in this market. The company has been benefiting from increasing subscriber addition in the form of membership subscriptions.

Moreover, expanding footprint in India, the biggest market in Asia with regard to Tinder, bodes well for Match Group. A burgeoning well educated middle class, increasing spending power and rapid adoption of smartphones are expected to boost Match Group's prospects in the country.

Zacks Rank and Other Stocks to Consider

Match Group carries a Zacks Rank #2 (Buy).

Paycom Software, Inc. PAYC , Aspen Technology, Inc. AZPN and Logitech International S.A. LOGI , in the broader technology sector are worth considering. All the three sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term earnings growth rate for Paycom, AspenTech and Logitech are currently pegged at 24.8%, 16.5% and 8%, respectively.

Wall Street's Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Match Group, Inc. (MTCH): Free Stock Analysis Report

Paycom Software, Inc. (PAYC): Free Stock Analysis Report

Logitech International S.A. (LOGI): Free Stock Analysis Report

Aspen Technology, Inc. (AZPN): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

LOGI AZPN MTCH PAYC

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More