Over the past six months, Match Group’s stock price fell to $30.66. Shareholders have lost 14.6% of their capital, disappointing when considering the S&P 500 was flat. This might have investors contemplating their next move.
Is there a buying opportunity in Match Group, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Match Group Not Exciting?
Despite the more favorable entry price, we're swiping left on Match Group for now. Here are three reasons there are better opportunities than MTCH and a stock we'd rather own.
1. Declining Payers Reflect Product Weakness
As a subscription-based app, Match Group generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Match Group struggled with new customer acquisition over the last two years as its payers have declined by 4.7% annually to 13.84 million in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Match Group wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products.
2. Customer Spending Decreases, Engagement Falling?
Average revenue per user (ARPU) is a critical metric to track because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Match Group’s ARPU fell over the last two years, averaging 21% annual declines. This signals its platform’s value is eroding when paired with its declining payers. If Match Group wants to increase its users, it must either develop new features or provide some existing ones for free.
3. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Match Group’s revenue to stall, a slight deceleration versus This projection doesn't excite us and implies its products and services will face some demand challenges.
Final Judgment
Match Group isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 8.3× forward EV/EBITDA (or $30.66 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
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