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Is Match Group a Reopening Stock? | #tinder | #pof | romancescams | #scams


Seeing as Match Group (NASDAQ:MTCH) owns a portfolio of dating apps, one might think the tech company took a bit of a hit during the recent global pandemic. While its digital-only products were not shut down at any point because of temporary governmental restrictions on social gatherings, there were still many people who were unable or unwilling to meet potential dates in person.

As a result, the company actually saw a slowdown in spending among its various dating products in 2020. But it’s expected that this slowdown will reverse in the coming years if the dating market comes back in full force post-COVID-19.

So, does this mean Match Group is a potentially great “reopening stock” play? Let’s take a look.

Image source: Getty Images.

The data backs it up

In its first-quarter 2021 earnings report, Match Group management laid out how COVID-19 has affected its business around the world. The company reported that in the second quarter of 2020 (April, May, and June of last year), revenue growth decelerated to 12% year over year. The business wasn’t devastated, but this was a slowdown from 2019 when sales grew 19% for the full year. The next few quarters saw an acceleration in sales growth, with the most recent quarter coming in at a heady 23% year-over-year rate.

The report also highlights how app usage and spending have correlated with COVID-19 cases and vaccinations around the globe. The number of first-time subscribers took a hit last spring during the first months of the pandemic, recovered in the summer, and then took another hit with the increase in COVID-19 cases last fall. The major vaccine rollout over the past few months has helped first-time subscriber growth normalize, which is a good sign for Match Group’s future sales growth.

MTCH Revenue (Quarterly YoY Growth) Chart

Image source: Ycharts.

However, the company is not completely out of the woods yet. A la carte revenue at Tinder, Match Group’s most popular app, saw a geographical dispersion over the last few months. In North America and Western Europe (where vaccination rates are the highest around the globe), daily a la carte revenue is now up around 30% vs. the start of the pandemic, while the rest of the world is still at the same level of spending. If these trends hold up once the majority of the world gets vaccinated in the coming 12 to 18 months, it could mean a further acceleration in Match Group’s revenue growth.

Growth opportunities abound

The majority of Match Group’s business currently comes from Tinder, but it has tons of smaller, high-growth products in the pipeline. One of these is Hinge, another dating app that is currently the third-highest-grossing lifestyle app on iOS in the United States. The app tripled revenue in 2020 and is on pace to double revenue in 2021. Management plans to launch Hinge outside of North America in 2022.

Going further down the pipeline, Match Group is making tons of smaller bets on niche apps like Hawaya (focused on single Muslims), Chispa (focused on Latinos), and BLK (focused on black singles). These apps don’t generate meaningful revenue for Match Group right now, but they show that the company has plans to go after every corner of the online dating industry.

Lastly, Match Group sees growth potential in an adjacent category to online dating: social discovery. It just closed on its $1.725 billion acquisition of Hyperconnect, which owns two social discovery apps called Azar and Hakuna Live. These apps are about matching like-minded people online, not just romantic partners. It is still early days within this space, so it is tough to tell how big the social discovery market can get, but it is another potential growth opportunity for Match Group over the next few years.

But what about the valuation?

One worry investors might have with Match Group stock is its valuation. The market cap is around $41.6 billion, which gives it a trailing price-to-sales ratio (P/S) of 16.6 and a price-to-free-cash-flow (P/FCF) ratio of 53.4. Both these metrics are expensive relative to most other stocks on the market. That being said, investors should remember that Match Group’s growth has been somewhat depressed due to COVID-19, and early indications are that once the lockdowns go away and vaccinations go up, growth in online dating starts to accelerate. If you believe these trends will persist, Match Group’s valuation could come down in a hurry.

If you’re looking for reopening stocks that could turn into great long-term holdings, you should take a good hard look at Match Group.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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