On Thursday, RBC Capital adjusted its outlook on Match Group (NASDAQ:MTCH) shares, the parent company of popular dating platforms such as Tinder and Hinge. The firm lowered its price target to $33.00, down from the previous $43.00, while maintaining an Outperform rating.
The revision follows Match Group's latest quarterly earnings, which continued a trend of underperformance largely attributed to ongoing issues with its Tinder application.
Despite these challenges, RBC Capital holds an Outperform rating for Match Group, bolstered by the valuation of the company at 8 times its estimated 2025 enterprise value and what is perceived as overly negative investor sentiment.
The firm highlighted that Hinge could now represent a significant portion of Match Group's valuation, potentially accounting for 60-80% of its entire market cap.
This comes as Match Group faces a decline in Tinder's payer growth, a trend that investors believe the management may struggle to reverse despite plans to update pricing and the Tinder product roadmap.
Nevertheless, Match Group has reaffirmed its expectations to return to payer growth by the third quarter of the year, which RBC Capital views as a potentially favorable turning point.
The analyst suggests that if Match Group can deliver on its promise, it could challenge the prevailing skepticism and prove that the online dating market is not yet saturated.
The firm has adjusted its estimates accordingly, lowering both expectations and the price target for Match Group's stock, while giving the company another opportunity to demonstrate its potential to investors.
InvestingPro Insights
As Match Group (NASDAQ:MTCH) navigates through its current challenges, there are several key financial metrics and strategic moves that investors should consider. According to InvestingPro data, Match Group boasts a market capitalization of $7.92 billion and is trading at a forward P/E ratio of 12.12, indicating a potential undervaluation relative to near-term earnings growth. This aligns with the InvestingPro Tip highlighting the stock's low P/E ratio in the context of its earnings potential.
Moreover, the company's aggressive share buyback strategy, as noted in another InvestingPro Tip, signals management's confidence in the company's future. Match Group's revenue growth remains positive, with the last twelve months as of Q1 2024 showing an 8.17% increase, and its gross profit margin stands at a robust 71.83%. These figures underscore the firm's solid financial foundation despite recent stock performance, with the stock declining over 15% in the past month.
While Match Group does not pay a dividend, the company has been profitable over the last twelve months, and analysts predict it will remain profitable this year. For investors seeking a more in-depth analysis, there are additional InvestingPro Tips available at InvestingPro, which can be accessed with a special offer. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover even more insights from the total of 8 InvestingPro Tips available for Match Group.
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