While its overall stock market performance has been strong, shares have sold off in recent weeks and after hitting highs of approximately $175 per share, the stock has slid back down to around $153 per share.
The “new normal” may be affecting how people meet romantic partners, to the benefit of Match’s plethora of online dating platforms (Hinge, OKCupid, Match, PlentyOfFish, Tinder), and while there’s clearly growth on the menu, it may not be enough for investors to keep “swiping right,” to propel the shares back towards recent highs.
Together with other “stay-at-home” plays, investor enthusiasm is starting to wane, and shares could trade sideways for a while as investors rotate out of these plays and back into stocks hard-hit by COVID-19.
Match Group Has The U.S. Online Dating Market On Lock
Across its platforms, Match holds a commanding share of the U.S. online dating market. That’s no surprise given that it owns every major platform, except for competitor, Bumble (BMBL).
Will Bumble, now flush with cash from its recent IPO, threaten Match’s future growth? It’s possible, since this rival now has the resources to compete in the battle for market share, especially in markets outside the U.S. where Match is exploring its next growth frontier.
In early February, Match announced its plans to buy Hyperconnect, a South Korea based social media company. This deal not only bulks up Match’s international operations, but also gives it access to Hyperconnect’s audio and video technology, which could be used by its existing platforms.
Match Group is making smart moves when it comes to building on its past success. However, this doesn’t guarantee further gains for the stock in the near-term.
Premium Valuation Leaves Little Room For Further Gains
Despite its recent pullback, MTCH stock sells at a premium valuation. At today’s prices, shares sell for around 14.3x estimated 2021 sales, with a forward P/E (price/earnings) ratio of 65.4.
Rich valuations like this are par for the course when it comes to fast-growing tech stocks, and although the company continues to expand at a healthy rate, this may not translate into a higher stock price.
Why? The recent outsized declines in the NASDAQ 100 (QQQ) relative to the S&P 500 (SPY) indicates that investors are rotating out of the pandemic plays that performed well in 2020, and into the recovery plays that could generate strong returns in 2021.
With earnings expected to double in 2022, there may be enough growth to prevent further declines. However, the inflated valuation and sector rotation by investors could limit the chances for shares to move higher through the rest of 2021.
What Analysts Are Saying About MTCH
According to TipRanks, consensus among Wall Street analysts on MTCH is a Moderate Buy based on 8 Buy and 3 Hold recommendations. The average analyst price target of $163.82 implies upside potential of around 7% from current levels over the next 12 months. Consensus targets range from a low of $140 to a high of $175 per share. (See Match Group stock analysis)
Bottom Line: Expect Shares To Hold Steady From Here
Together with other large-cap stocks in the tech sector, Match Group has “crushed it” during the past year. However, after an impressive run in 2020 and early 2021, shares could take a breather through the rest of the year.
Tech stocks overall are starting to sell off as investors rotate into other sectors. There may be enough in the growth department to hold MTCH steady, but a move back to past highs (or beyond) may not be likely in the short-term.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.