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Match Group Looks Promising on Upbeat Q3: Should You Hold?

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Match Group Looks Promising on Upbeat Q3: Should You Hold?

Match Group (MTCH) is benefiting from increasing subscriber addition in the form of membership subscriptions.

Match Group MTCH shares have been rallying since third-quarter fiscal 2018 earnings release on Nov 6. In fact, the company has outperformed the industry in the past year.

Shares of Match Group have gained 39.3% against the industry’s decline of 20.8%. The company’s impressive price performance can be attributed to its laudable earnings surprise history. The company surpassed earnings estimates in three of the trailing four quarters, recording an average beat of 7.2%. The company has a long-term expected EPS growth rate of 12.5%.

Match Group delivered third-quarter adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 3 cents. It was also significantly higher than year-ago quarter figure of 19 cents.

Revenues of $443.9 million surged 49.2% year over year and beat the Zacks Consensus Estimate of $437 million. Year-over-year growth was primarily driven by 23% increase in average subscriber base and 6% rise in Average Revenue per Subscriber (“ARPU”).

Encouraging Outlook

Match Group anticipates fourth-quarter 2018 revenues between $440 million and $450 million. Tinder remains the key catalyst. The Zacks Consensus Estimate is pegged at $440.7 million.

For fiscal 2018, the company expects revenues top-end of the previously provided guidance range of $1.68-$1.72 billion. The Zacks Consensus Estimate is pegged at $$1.72 billion.

Growth Drivers

Match Group is benefiting from increasing subscriber addition in the form of membership subscriptions. Total average subscribers in the third quarter came in at 8.1 million, surging 23% from the year-ago quarter.

The company boasts of a robust product portfolio comprising Tinder, Match.com, Meetic, PlentyOfFish and OkCupid.

Notably, revenues from Tinder soared 100% year over year in the prior quarter. It remains as the key catalyst behind the company’s year-over-year growth. Tinder average subscribers increased 61% year over year and came in at 4.1 million.

Better-than-expected renewal rates for Gold are noteworthy. In the last reported quarter, ARPU in Tinder grew 24% year over year, primarily on the back of higher number of Gold subscribers.

In a bid to boost Gold adoption, the company had rolled out “Top Picks” feature on Tinder. This feature is anticipated to bolster Tinder Gold subscribers, consequently aiding the company to generate incremental revenues, going forward. Tinder also introduced Tinder U service custom made for college going students.

Moreover, expanding footprint in India, the biggest market in Asia with regard to Tinder, is likely to be a tailwind.

Bottom Line

A successful investor understands the importance of retaining well-performing stocks in the portfolio at the right time. Indicators of a stock's bullish run include a rise in share price and strong fundamentals. Though there may be some concerns regarding the stock but they are transitory in nature. Consequently, considering these factors, investors are suggested to retain this Zacks Rank #3 (Hold) stock for the time being at least.

Key Picks

NetApp, Inc. NTAP, Castlight Health, inc. CSLT and Arista Networks, Inc. ANET are stocks worth considering in the broader technology sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp, Castlight Healthand Arista Networkshave a long-term EPS growth rate of 14.1%, 22.5% and 21.3%, respectively.

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