The Company Redefining Online Dating

If you're single, you'll likely know this company. If you're not single, but have single friends, you'll likely know this company. If you're not single there's still a chance you know this company. But whatever bucket you fall into, the reason you may know this company is because they're absolutely dominating their industry.

So who are they? Match Group. The people behind companies such as Hinge, Tinder, Match.com, OkCupid and others. And last year they did $2.4B in revenue and are continuing to grow fast. But now there is a big new development in the company, that has caught our attention. Let's break down what that is and what it means for the company!

Match Group's Technicals

One of the developments is that the stock is down 7% in the last month. And guess what? We love it! This is because the stock is up 387% in the last 5 years and is finally showing some good signs of entry!

So why is this happening? Largely due to the slowdown of their business in APAC (Asia Pacific). But looking past APAC, we see that the Match Group is seeing improvement across nearly all of their other geographies - with strong momentum continuing into the summer months. We forecast for them to do $1.7B in revenue in the second half of this year. So while there are some obvious short term headwinds (cough, cough: COVID), the longer term thesis is still intact. We're therefore using the pullback in their recent earnings report to deploy more capital.

And that is, that Match is finding product market fit and revenue expansion more-so than another other dating company out there!

Match Group's Fastest Growing Product

Another development is happening with one of their fastest growing individual products: Hinge.

Hinge should do around $200M in revenue this year, which is blowing away expectations coming into 2021. Growing at nearly 100% in revenue from the year before, the expectations for Hinge are massive. When comparing this growth to Bumble (the largest competitor outside of the Match Group), we see them at 40% the size of Bumble, but only with a fraction of their reach. Bumble, for example, is international with multiple paying tiers and further reach. Hinge's offering is much smaller and much younger. If Hinge is able to continue growing as fast as they are, there is a strong chance they end up overtaking Bumble within the next few years to become the 2nd most popular dating app in the world! If they're also able to increase their active users at the rate they are, you better believe investors are going to take notice sooner rather than later, thus driving the stock price up for Match group.

Therefore as investors, we're choosing to invest in Match Group sooner rather than later, before the stock's next upswing starts!

Match Group's Stock Price

Therefore, as we came to the conclusion that we wanted to invest in their stock, we decided to take a different approach to figure out what they should be valued at. We therefore deployed a valuation method called sum of the parts. Rather than just valuing the business as a whole, sum of parts values each individual business unit and then adds them together. The reason we did this for Match Group is because they have so many business lines - much more than the average company!

When looking at their business lines, we see that Tinder is by far and away contributing the most to their stock price today. However, over time, their emerging brands like Hinge are poised to deliver strong input into their overall valuation. We therefore took a conservative valuation and arrived at a price target of $180. We're using this weakness as a good entry point for the company. 

Price Target: $180 (25% upside from current price of $146)

Target Date: December 2021

Rating: Overweight

Ticker: MTCH