Betting on love and romance may be a good idea as we head into Valentine’s Day. The online dating scene becomes especially active around this time of year. And that means great opportunity, especially if you want to trade a name or two on momentum.
There are a number of companies trading in eLove. So, is it time to add love to your portfolio? Our pick of the lot would be Match Group, Inc. (MTCH). We’ll tell you why.
The Case For Match Group, Inc. (MTCH)
It’s said that when investing in (or trading) a stock representing a group of companies, there’s great wisdom in owning a company that’s part of a strong group, rather than a single-brand entity. Why? Because individual component entities in a group-portfolio do the heavy lifting collectively, and the entire group benefits from the collective synergies. And that’s what you get with MTCH.
MTCH owns and operates a wide portfolio of online dating and related brands, some of the more renowned of which are Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, Pairs, and Hinge. With a diverse portfolio like this, there is greater likelihood that enlisted members will find dating success. And with that success comes repeated visits…and word of mouth endorsements.
Additionally, the opportunities of cross selling abound. Each platform operates independently, and are competitors for match seekers attention. But they can easily promote the other’s “special offers” and branding – which can only be good for MTCH’s bottom line! Of course, just like other groups of companies do, there is a risk of cannibalism – one component aggressively stealing the other’s clients – but that risk can be managed by the parent.
The most compelling bull case for owning MTCH is its long-term financial performance.
On Nov 23rd 2015, the stock closed at $14.41. Fast-forward to Feb 4th 2019, and the stock is valued at $54.74. That’s a nearly 280% ROI in slightly above 3 years (38 months). Who could complain about that? But there’s more love where that came from!
The Group reported Q4-2018 earnings recently (Feb 6) and delivered adjusted earnings of 43 cents per share, which was a 10.29% beat over what some analysts expected (39 cents). Better yet, those numbers were 48.28% higher than the 29 cents MTCH delivered in the year-ago quarter! And…the love keeps flowing (overflowing, in fact!):
- The company reported revenues of $457.3M, which were nearly 21% more than it earned in Q4-2017 ($378.9M), and beat many analyst’s expectation ($448M) by about 2%
- MTCH Group saw a healthy 17% year-over-year increase in its average subscriber base, and managed to squeeze an additional 4% in Average Revenue per User (ARPU)
- The company boasts of an average subscriber base that’s 8.2M strong, and is worth 58 cents in ARPU contributions
- Over the past 5 quarters, Revenue has steadily been climbing – which shows the company not only is able to grow its subscriber base, but has a track record of monetizing them
Over the past two 2 years, the company has managed to beat consensus EPS estimates 75% of the time. But that’s not all. Over that same period, MTCH reported revenue higher than analysts’ estimates 88% of the time.
Now, if you don’t think that’s solid financial performance, then perhaps MTCH isn’t a good match for your portfolio after all!
Why now – Is there really love ahead?
With Valentine’s Day fast approaching, millions of MTCH’s subscribers will likely take to the (online) streets in search of eLove. And that can only mean good news for the company. Around this time last year, we saw the stock price move up
While there’s no predicting accurately whether the same love lies ahead for MTCH, the tendency certainly seems to be holding true this year. Two years do not make a trend, as technical analysts like to remind us – so you need to factor that into your decision. Besides, the recent up-swing could also be attributed to a good Q4 report.
The case for love ahead could also be made based on the company’s forward guidance statements. It expects Q1-2019 revenue to hit the $455M-$465M mark, which is considerably better than the $407M it reported in the same quarter last year.
Given the current economic environment though, don’t expect full year revenue growth to beat (or even match) 2018 performance. Still, MTCH expects fiscal 2019 to bring in mid-teen growth in its revenues, which isn’t bad – if they hit those targets.
The Match-making Landscape
Some heavyweights in the “online communications” space are MTCH, Snap Inc. (SNAP) and Chinese online dating company Momo Inc. (MOMO).
However, there are differences in each of their Profitability and Management Effectiveness profiles that investors should take into account. And even though the MTCH vs. MOMO match (pun intended!) isn’t all too bad, the fact that it operates outside of U.S. jurisdiction might make some investors hesitant to add it to their portfolios.
Generally speaking, there seems to be momentum brewing in the online dating sector.
If you would have built a portfolio with a basket of names in that space, you would have seen it grow by over 24.5% in the past 90 days.
And while that return would be significantly muted over a 200-day period (3.55%), individual names like MTCH and parent company IAC would have handily outperformed, yielding you oversized returns of more than 40% each.