Some companies have moats that cannot be ignored, and Match Group fits that bill. Match is the company that houses online dating apps, such as Tinder, Hinge and its original flagship site, Match.com. But what makes the stock attractive to own, besides the fact that it’s Valentine’s Day and love is in the air?
Match Holds A Dominant Market Share
One persistent tailwind Match has going for it is that human behavior has stayed constant for millennia; mating is in our genes and Match holds the dominant market share position, an astonishing 65%. Its closest competitor, Bumble, sits at 22% market share.
The numbers speak for themselves. Match revenues have been growing even during the pandemic years. In 2019 revenues were $2.05 billion. The following year they grew by 16.6% and in 2021 they grew by 24.8%. In the most recent fiscal year, revenues reported were $3.1 billion.
Concerns have been voiced by naysayers that growth slowed to just 6.9% over the past year. However, slower revenues have not translated to reduced operating income. By contrast, the operating income figures popped from $386 million in 2021 to $523 million in fiscal year 2022.
That kind of operational efficiency only strengthens the company’s position to deploy cash towards acquisitions to further market share, and research and development to boost product stickiness and customer lifetime value.
Valuation Is Attractive
What makes the company a more appealing investment opportunity now is that the share price has come down substantially over the past year. Twelve months ago the share price was sitting at $115. The subsequent decline of close to 60% has brought the share price in line with fair value by our calculations.
When we crunched the numbers on a ten year discounted cash flow forecast analysis, we arrived at a fair value of $55 per share, which is about 18% higher than where MTCH share price sits at the time of research.
Undoubtedly, the short-term and longer-term share price technical trends for Match Group are bearish but this is a company to keep on your watchlist because a technical break above downtrending resistance would be the first sign that perhaps a positive change has been triggered.
The compelling financials will be realized in the share price over the long-term. It’s just a matter of when the trend breaks back bullish, and bullish sentiment returns. Value investors will soon see the merits of deploying capital into MTCH if the share price continues its descent. Watching that big money flow will be a hint that the time has come to jump on board this online dating juggernaut.