Match Group, Inc. (NASDAQ:MTCH) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 5.5% to hit US$640m. Match Group reported statutory earnings per share (EPS) US$0.46, which was a notable 13% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus, from the 18 analysts covering Match Group, is for revenues of US$2.83b in 2021, which would reflect a painful 43% reduction in Match Group's sales over the past 12 months. Statutory earnings per share are expected to descend 14% to US$2.13 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$2.75b and earnings per share (EPS) of US$2.48 in 2021. While next year's revenue estimates increased, there was also a substantial drop in EPS expectations, suggesting the consensus has a bit of a mixed view of these results.
Curiously, the consensus price target rose 9.7% to US$140. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Match Group at US$160 per share, while the most bearish prices it at US$87.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 43%, a significant reduction from annual growth of 9.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 16% annually for the foreseeable future. It's pretty clear that Match Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Match Group. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Match Group going out to 2024, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 2 warning signs for Match Group that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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