Match Stock Forecast: Will Facebook Break Hearts?

Match Stock Forecast: The digital revolution has upended social customs, and the search for love is no exception.

Long gone are the days of village matchmakers, singles events, and “lonely hearts” newspaper ads. Today’s lonely hearts simply log into one of the many online dating platforms from the comfort of their own homes. From there, they can browse profiles, chat with other users, and check out suggested matches, virtually “meeting” dozens of people every day.

For many, this is a huge timesaver – no need to sit through dozens of long, dull first dates to find a gem. The service is available 24-hours a day, so singles with complicated schedules have a chance to find companionship, too.

Online dating pioneer Match Group is a leader in this space, and investors have seen stock values rise dramatically in recent months. Can the company continue to hold its market share now that powerful competitors are launching products of their own?

Match Group’s Acquisition Spree 

At its core, Match Group [NASDAQ: MTCH] is a technology company, relying on advanced software to connect compatible users.

It was one of the first to enter the online dating market with the launch of Match.com in 1995. After incorporating in 2009, the company pursued a two-pronged growth strategy. First, there was a strong focus on updating features to offer users a superior experience.

Second, Match turned into a master of acquisition. As new platforms gained steam and grew in popularity, Match added them to its family of dating sites.

Today, Match Group owns more than 45 dating-relating companies, 25 of which were acquired in the past ten years. Examples of popular Match Group brands include OKCupid, acquired in 2011, and Plenty of Fish, acquired in 2015.

Match held its IPO in November 2015, at which time the company was valued at $2.9 billion. Then, Match Group boasted 59 million active monthly users in more than 190 countries – and those users were meeting each other in 38 languages. Of the 59 million, 4.7 million were paid subscribers.

Today, Match Group’s market cap is at $22.12 billion, thanks in part to the wild success of its Tinder app, which launched in 2012. Of course, many of these services are free – so how does Match Group make money?

How Does Match Group Make Money?

Though many of Match’s services are available free to users, the company has perfected the art of selling paid features through subscriptions.

Subscribers to various platforms enjoy greater visibility into other users’ profiles, and subscriptions offer enhanced opportunities for searching and communicating with others.

Subscriptions bring in a majority of Match Group’s revenue, and a large share of that comes from Tinder. In the second quarter of 2019, the average number of Tinder subscribers grew 41 percent year over year to a total of 5.2 million individuals. Of those 5.2 million subscriptions, 70 percent opted for Tinder Gold – a more expensive service with better features.

Total subscribers across all dating platforms grew 18 percent year over year to a total of 9.1 million. After Tinder, much of this growth can be credited to OKCupid, which increased subscription revenue for a sixth consecutive quarter in North America. OkCupid is the number one dating app in India.

Tinder Is The Diamond 

All in all, this growth in subscribers led to a stellar second quarter for Match Group [NASDAQ: MTCH].

Revenue went up by 18 percent to $498 million, which was an improvement over analysts’ predicted $489 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 16 percent, for a total of $193 million.

Better still, business leaders gave promising third quarter guidance, indicating that they expect revenues between $535 million and $545 million. That exceeds analysts’ predicted $521 million.

For the full year, Match execs increased their estimates around new subscribers for the Tinder app. The original guidance was 1 million, but the company now expects to see 1.6 million new paying users for 2019.

Investor response to the second quarter earnings reports was enthusiastic. Share prices shot up, to the point where stock was worth twice what it had been the year before.

New features are rolling out in coming months, including an original video series intended to serve as a conversational icebreaker for newly matched pairs. Match has long been a leader in the dating service space, and it continues to innovate in an effort to grow its market share.

What are the Risks of Buying Match Group Stock?

With so much good news in the second quarter earnings report and rosy promises for the third quarter, it seems like Match Group [NASDAQ: MTCH] is an obvious buy. However, there is an obstacle that could disrupt Match Group’s plans.

The much-anticipated Facebook dating feature has now arrived in the United States, and many Match Group investors are concerned.

As soon as Facebook announced the official US launch of its new feature, Match Group share prices dropped 5 percent.

After all, Facebook currently boasts 2.41 billion monthly active users worldwide and 190 million in the United States. For perspective, the US population is estimated at approximately 330 million, so more than half of the country is active on the site.

The new service has access to a massive audience that simply isn’t available to Match Group [NASDAQ: MTCH].

Facebook plans to leverage the popularity of its existing social media platforms to maximize user experience on the dating site. For example, users will have the ability to integrate their dating profile with their regular Facebook and Instagram posts.

But perhaps the greatest concern for Match is that Facebook’s service is free – and the company doesn’t plan to include ads for now. Some analysts believe these benefits may pull subscribers away from Match Group’s platforms.

Is Match Stock a Buy? 

Overall, most current Match Group [NASDAQ: MTCH] investors aren’t losing sleep over Facebook’s entry in the online dating market.

After all, Match has proven successful quarter after quarter, and it will be some time before Facebook’s dating feature could pose any real threat.

On top of that, data show that many online daters don’t cancel one service for another. Instead, they maintain a collection of profiles on multiple sites to increase the number of people they meet.

Match Group stock prices have gone down a bit since their spike in August 2019, so this could be the right time to buy.

The company is likely to recover the August gains if third quarter results are good. With that said, there is some risk in buying Match Group stock today if the plan is to hold shares for an extended period.

The company is likely to continue on a growth trajectory, which would prove profitable for new shareholders – but if Facebook does succeed in stealing market share, that growth could slow or stop altogether.