With a $31.70 billion market cap, Match Group, Inc. (MTCH) in Dallas, Tex., is the world’s largest online dating platform. Its portfolio includes popular dating sites Tinder, OkCupid, Hinge, and Match.
With a global market presence, MTCH provides services in more than 40 languages. However, the company has an ISS QualityScore of 9, indicating high governance risk.
However, investors have been bearish about MTCH due to its decelerating market share and poor last quarter results. The stock has plummeted 18.1% in price year-to-date to close Friday’s trading session at $109.02.
Here is what could shape MTCH’s performance in the near term:
Lawsuits
In October 2019, the Federal Trade Commission sued MTCH for alleged violations of federal securities laws. The lawsuit alleges that MTCH used fake love interest advertisements to trick users into purchasing or upgrading paid subscriptions. Also, the company allegedly made several false promises of “guarantees'' and made it difficult for users to cancel their subscriptions. Furthermore, MTCH allegedly lacks adequate disclosure controls and procedures, and the positive statements made by the company’s management regarding its operations, business, and prospects were materially misleading and/or lacked a reasonable basis.
Several law firms have also filed class-action lawsuits against MTCH. Also, the founders of Tinder have sued MTCH, alleging that the latter purposely lowballed its valuation during the Tinder acquisition.
Bleak Profits
For its fiscal fourth quarter, ended December 31, 2021, MTCH’s revenues rose 23.7% year-over-year to $806.07 million. This can be attributed to a 15% rise in total payers. Its operating income stood at $231.92 million, up 9.1% from the same period last year. However, its operating income margin declined four percentage points to 29%.
The company’s net loss amounted to $168.72 million, compared to $148.64 million in income reported in the prior-year quarter. This can be attributed to a $226.82 million loss from continuing operations before tax. Its loss per share widened by 220% from its year-ago value to $0.60.
Frothy Valuation
In terms of forward non-GAAP P/E, MTCH is currently trading at 41.29x, which is 125.5% higher than the 18.31x industry average. In addition, the stock is currently trading 8.78 times its forward sales, which is 450.6% higher than the 1.59 industry average.
MTCH’s forward Price/Cash Flow and EV/EBITDA multiples of 33.71 and 27.35, respectively, are significantly higher than the 9.98 and 9.36 industry averages. Its 9.69 forward EV/Sales ratio is 332.6% higher than the 2.24 industry average, while its 64.13 forward Price/Book ratio is 2,547.8% higher than the 2.42 industry average.
POWR Ratings Reflect Bleak Prospects
MTCH has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MTCH has a grade of D for Value, Sentiment, and Momentum. The stock’s premium valuation is in sync with the Value grade. In addition, the Street expects MTCH’s EPS to decline 7% year-over-year to $0.53 in its fiscal year 2022 first quarter (ended March 31, 2022), justifying the Sentiment grade. Also, MTCH is currently trading below its 200-day moving average of $137.06, in sync with the Momentum grade.
Among the 71 stocks in the F-rated Internet industry, MTCH is ranked #49.
Beyond what I have stated above, view MTCH ratings for Growth, Quality, and Stability here.
Bottom Line
MTCH has been engaged in a battle for market share with Bumble since Tinder co-founder Whitney Herd was ousted from Tinder. Moreover, with several class-action lawsuits and bleak earnings, we think MTCH is best avoided now.
How Does Match Group (MTCH) Stack Up Against its Peers?
While MTCH has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Yelp Inc. (YELP), Travelzoo (TZOO), and Opera Limited (OPRA), which have a B (Buy) rating.
MTCH shares were trading at $111.60 per share on Monday morning, up $2.58 (+2.37%). Year-to-date, MTCH has declined -15.61%, versus a -3.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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