Spotlight: 1 Stock To Get Hot and Bothered By

Sometimes a deal just falls in your lap and that might well be the case now with Match Group. The online dating giant houses many, perhaps even most, of the dating apps you have heard of, from Tinder to Hinge.

Sadly for shareholders, the stock has had a downright awful year, plunging 26% year-to-date after a poorly received earnings report a few days ago.

The question on the minds of investors now is whether the selloff is overblown and if now is the right time to swoop in and secure a deal?

Key Points

• Despite the stock’s recent performance, Match Group presents a buying opportunity based on several valuation indicators.
• Rising interest rates and increasing credit card debt among consumers could lead to a reduction in discretionary spending on services like online dating, posing a risk to Match Group’s revenue.
• Bumble, a key competitor, though smaller, is growing more rapidly and could potentially attract customers away from Match Group with its unique product-market fit.

Is Match a Buy?

By almost any measure we look at, Match is a buy now. Not only was it technically oversold after its earnings report crash but fundamentally it’s very attractive now too.

Analysts have placed intrinsic value way higher at $44 per share and a careful analysis of key financial ratios from P/E to last twelve month price-to-sales also confirm that the company appears to be undergoing what can only be described as a fire sale. Match’s P/E is just 16 while its trading at under 3x sales.

Intriguingly, a discounted cash flow analysis, which often comes in shy of analysts’ estimates also confirms a similar upside price target.

When you put the combination into a mix, it’s hard to find a reason not to buy the stock.

What Could Go Wrong?

If anything could derail the Match investment thesis it’s the macro climate that increasingly is looking frail. As rates rise and a significant portion of Match’s customer base struggles with credit card debt, which is skyrocketing, there is serious risk that one of the first subscriptions to be chopped is the online dating one. Why not simply date conventionally at a bar or club for free versus paying a monthly subscription if money is tight?

Another potential risk comes from Bumble, the firm’s arch-rival, which is only about one third the size but continues to grow more rapidly. While Match has brands galore under its corporate hood, Bumble has a product-market fit solution that is the envy of any company attempting to scale. That threat from Bumble very simply boils down to customers choosing it over Match.

To Buy or Not to Buy?

In the short-term the weekly trend is decidedly lower for Match share price but the daily may be on the cusp of turning around after being oversold and spiking following earnings.

For investors willing to sit on the shares for a longer time period, particularly those with a multi-year outlook, the valuation argument is compelling now for Match and may make for potentially a real steal.