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I Blew It On Match Group, But It Isn't Too Late

MGB Research profile picture
MGB Research


  • Match Group benefits from societal tailwinds, a sticky business model, and network effects.
  • Successful rollout of Tinder Gold is a harbinger of the company's future pricing power.
  • Low marginal costs and marketing expenditure will continue to generate huge amounts of free cash.
  • Here I reassess the stock's potential returns based on recent developments.

When I first wrote about Match Group (NASDAQ:MTCH) back in October 2017, I recommended holding off on buying shares due to the company’s high valuation. Although I stand behind that analysis based on the information that I had at the time, clearly there were elements that I missed.

Since then the stock is up 60 percent, yet the growth story remains fundamentally intact. Investors have by no means “missed the boat” on this company. Here I review Match’s attractive economics, and I also explain why my thinking has changed on the company.

Societal Tailwinds

I must confess that part of my about-face stems from personal experience with Match Group’s products over the last three months. As a young professional, I have found these online platforms to be a fruitful way of attracting dates. Within my own immediate and extended social circle, adoption of online dating has progressed rapidly over the last few years with a large measure of success.

This anecdotal evidence is backed by survey data. As I wrote in my previous piece, societal attitudes toward online dating have shifted massively since the advent of the internet. According to Pew Research, just 44 percent of Americans agreed that online dating is a “good way to meet people” in 2005. By 2015, 59 percent of responders agreed with that statement. In 2013, a mere 10 percent of people aged 18-24 had used online dating. That number has more than tripled over the last few years.

The Business Model

The first major tailwind is the company’s highly profitable and sticky business model. Like other social media platforms, Match’s various dating sites and apps benefit from network effects. With network effects, a product becomes increasingly valuable to users as more people sign on to the product. Any new entrant would have to build up a critical mass

This article was written by

MGB Research profile picture

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MTCH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

Why doesn’t this author just copy and paste everything that I put on this site last month. You basically have to be an idiot not to realize that this company doesn’t have any overhead this company doesn’t have any expenses and they have a monopoly on the one thing, young, old, black, white, gay, straight… Every single human being on earth wants.
And no it doesn’t matter who the Flippin president is of match as if that has anything to do with trying to get laid. Seriously your way overthinking this. The stock will be over 60 in two months.
But hey don’t listen to me I’ll take all the profits thank you. One other thing the same thing is happening in China and Momo has more people less debt
And a monopoly on love in China.
Nobody needs a stockbroker to figure out companies like Ring Central selling cloud services is going to go up.
Maybe I should be doing this for a living. Because companies like JP Morgan are lying to you.
MGB Research profile picture
not having "any" overhead or expenses is going a bit overboard with the hyperbole. Marginal costs are low, to be sure, but marketing (insofar as they run formal campaigns) and stock compensation for employees are very real expenses. And it isn't a "monopoly," there are competitors (eharmoney, Badoo, etc.)

That said, I think that the positives far outweigh the negatives. That's why I own the stock now.
The Virtuous Cycle profile picture
I still like Match, which was my best-performing stock of 2017. Best case scenario is that this is a business with winner-take-all (or take-most) dynamics in the early-to-mid innings of its growth cycle and with Match ultimately coming out as the winner.

Like Warren Buffett asked. Will technology change how people chew gum 10 or 20 years from now?

Likewise, will people still be dating 10 or 20 years from now? Probably so. Although with virtual reality and IVF, who knows what might happen, right?

Match is best positioned for the OLD trend so far. Now all that's left is for management to operate the business in a way that rewards shareholders as well. Fingers crossed. JMTC.

MGB Research profile picture
Thanks for the comment. All things being equal, I would prefer to own a condom business over a dating website, as I stated in my previous Match article. Latex condom design hasn't changed substantially in nearly a century, and no one has come up with an equally cheap and foolproof contraceptive.

That said, the major online dating brands have proven pretty durable over the last quarter century, despite a major shift to mobile.
The Virtuous Cycle profile picture
Good point. And perhaps a reason to consider CHD or similar company as well. I guess with the one you have more stability, less uncertainty, and a very well established market. Although with the other there's greater potential for growth and scalability of the business model.
FernandoArdenghi profile picture
"According to CNBC, sources now say that Bumble parent Badoo intends to put itself up for sale at a valuation of USD 1.5 Billion."
Badoo CEO said that info is wrong!!!

Badoo, backed Bumble and has its own silly / bogus patent, since 2007.
FernandoArdenghi profile picture
"Match Group has also installed new executives to replace the previous management regime"
FYI: They are all puppets from Barry Diller.
Mandy Ginsberg created Chemistry last 2004, 14 years ago. She is not new.
Moreover, she plans to feminize Tinder.
They are in war with Badoo.
MGB Research profile picture
I don't agree that installing an optional feature to block men from messaging first is "feminizing" Tinder. Seeing that most women are inundated by messages on these platforms, I don't see anything wrong with it.
Mike, it doesn’t matter who’s running it. They have a monopoly on love.
Next to water, nothing is more important to human beings.
Why didn’t they do it right away is what I want to know. As soon as Bumble came out this should have happened like the way FB assume stories from SNAP. Thoughts on that? I think they could have neutralized bumble immediately.
jaljojo profile picture
I was a fan of your column when you said ebay was going to hit 44. It took a while but it did hit the target. When you wrote about MTCH I thought you were wrong. How could an app that’s the highest grossing app of all time and with so much upside potential (international revenue, ads, acceptance of online dating, etc) be overvalued at a PE of 24ish? I literally laughed and bought more. Glad I listened to my intuition. Thanks for validating what I knew :)
MGB Research profile picture
Glad you made out well. No one is right 100% of the time and I am no exception.

That said, I don't invest based on potential. I have to be fairly certain about something before I am interested. In this case, I could have easily thought a bit deeper and recognized Match's pricing power/upselling, but I didn't. That's why I blew it. A company with lots of potential and a low P/E can still be extremely overvalued if there is a lot of uncertainty (and subsequent failure).
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