Is Match Group Stock a Buy Now?

Since our last analysis, Match Group's stock has been dragged down nearly 50% to just under $70. 

If you're unfamiliar with Match Group, they're the parent company to dating brands like Tinder & Hinge.

But a lot of this downturn is due to temporary circumstances -- the overall bear market has been unfairly compressing valuations and Match just got hit with a wild lawsuit from Google that is applying a lot of downward pressure to their valuation. 

All of these circumstances point more to the fact that is turning into a very solid buying opportunity for a strong business at a brief moment of weakness. 

Moreover, Match Group is one of those businesses that can maintain its value even if the market continues to go down. It doesn't matter if there's a full-blown recession, people will always need to connect (more on why this is historically proven below). 

And thanks to their portfolio companies, Match Group is the absolute emperor of connection across all ages. 

Let's get into it. 👇

Match Overview:

As with many investments right now, a large majority of them are down big in 2022.

And as much as that may pain you to look at, this truly presents buying opportunities for long-term investors.

But this isn't just a classic 'buy-the-dip' scenario. This is more our team hunting for businesses that perform well even during recessions (should this bear market even turn into a full-blown recession).

Match Group performed brilliantly during the 2020 recession -- but that one was so hot and fast that it's a bad comparison for the downturn we're currently experiencing. 

So we need to go back to the last extended down period -- the 2008 financial collapse.

Match Group had not IPO'd that far back -- but they posted user growth data as well as some revenue information during that period. 

Comparing that (admittedly fuzzy) growth to the rest of the market -- Match group (well, match.com) drastically outperformed other tech companies.

Sure, their revenue growth declined just like everyone else's (revenues still grew though), but it didn't decline nearly as much as other tech & communications firms. And once the recession ended, revenue growth shot back up to the high teen percentages.

And outside of revenue, user growth flourished going from 1.3M users in 2007 to 1.8M just one year later. This increasing base of users helped them also grow margins in a time where everyone else's were contracting.

That's why the fundamentals here make sense -- it really doesn't matter how dire the financial outlook is, people are going to try to date no matter what.

And Match group is uniquely poised to stay comparatively strong even if the most bearish estimates for the overall economy play out. 

Online dating has exploded in the last 5 years, becoming the #1 way new couples meet. Tinder is a better matchmaker than even your friends these days according to the data. 

Match Group owns 2 of the top 3 dating sites in Tinder and Hinge. Heck, our analysts are pretty excited about the #2 app -- Bumble -- as well.

However, we only have a surface-level understanding of this recent IPO, and the upside for them isn't as potentially massive as it is for Match Group. Stay tuned though -- once we've seen a few more earnings reports from Bumble Group, we might initiate a small position there too. 

But what if the macro bears are wrong? Can Match still outperform in a rebounding economy? 

Match Composition:

The short answer is yes. 

The brilliance behind Match Group is the masterful repositioning of Hinge in comparison to Tinder.

Tinder took over the whole world as a more casual dating app. Meanwhile, Hinge has seen massive growth as the dating app "designed to be deleted." Hinge caters to users who are tired of casual dating and are looking for more serious, long-term relationships. 

Since this repositioning, Hinge has absolutely exploded to 20 million users. Their revenue tripled from 2019 to 2020 and doubled to 190 million from 2020 to 2021. 

And this is within a very limited geographical area. Tinder is available in 190 countries while Hinge's growth is primarily based in the US and 19 other nations. 

Tinder's international expansion started before they were acquired by Match Group -- but it was perfected post-acquisition. Match Group is going to take everything they learned from making Tinder a worldwide phenomenon and have an easier time bringing Hinge to a wider international market.

We should note that the revenue potential for Hinge isn't as great worldwide as it is in US markets -- but there's still a lot of growth on the table across the next 2-5 years as they take Hinge's more long-term and serious brand worldwide. 

And this is completely discounting Tinder's 18% YoY paid user growth and Match Group's expansion into niche dating plays like Stir for single parents.

Even if Hinge underperforms (which is possible -- especially in East Asia) Match has a lot of diversified areas for growth.  

This is why this countersuit from Google presents a solid buying opportunity by pushing Match Group's valuation far lower than it would otherwise be. 

Wait--What Lawsuit? 

Yea so, we'll try to make this quick. Y'all know how Google and Apple charge fees for apps using their app store? Apple charges 30% while Google charges a variable rate that's more around 15%? 

Yea that's a pretty onerous business tax being levied on basically any company trying to access the largest consumer base on Earth. There's no real competition for the Google Play & Apple App store (don't tell that to Epic Games though). 

And on Android specifically, Google is applying monopoly-like pressures to businesses. So Match Group sued Google back in April on antitrust grounds. We really don't want to bore you with the details -- but we like seeing lawsuits like this. Monopolies destroy shareholder value, so any company badass enough to take on either Google or Apple in court on antitrust grounds gets a huge plus in our books. 

Anyway, Google fired a countersuit against Match Group on Monday that's basically their legalese way of calling Match's claims BS. It's not a frivolous lawsuit, but it's more a piece of Google's overall strategy trying to defend itself from any antitrust attention. 

The market hates lawsuits, no matter their reasoning (just check out how Twitter is doing this week). Therefore, Match Group's stock plummeted 5% this week on the news. This is after a huge downturn caused by the overall bear market. 

Both of the big forces pushing MTCH beneath 70 dollars per share are temporary. It's really hard to find a stock this undervalued with such strong growth and fundamentals. 

All this $70 price point presents is a really strong buying opportunity for investors trying to get in on the ground floor of the next 3 years of international takeover from Match Group.  

Match Summary:

There's so much more to Match than what we've covered, but from diversified offerings to immense growth potential, Match is the clear master of the online dating space.

Dating is going to be one of the rare consumer discretionary sub-industries that doesn't get hit hard by rising prices and diminished market outlooks. 

Getting in at this compressed valuation is practically a no-brainer. We're excited to see how far Match Group can push this growth! 

Revised Shorter-Term Price Target: $98 (45% upside)

Current Price: $68

Target Date:  Q2 2023

Rating: Overweight

Ticker: MTCH

Risk/Reward: Medium/ High

Market Cap: $19.4B

Dividend Yield: 0%