On Thursday, BofA Securities revised its stance on Match Group (NASDAQ:MTCH), moving from a Buy to a Neutral rating. The firm also reduced the price target for the company's stock to $35.00, a decrease from the previous target of $50.00. The downgrade comes in response to Match Group's fourth-quarter guidance, which fell short of expectations, and a notable decline in the number of paying Tinder users.
The analyst at BofA Securities highlighted that the previous Buy rating was based on the assumption that Match Group was in the initial phase of reviving user and payer growth for Tinder, which accounts for over 70% of the company's earnings. Additionally, it was anticipated that Hinge would continue to see robust revenue growth and potentially reach over $1 billion in three years, while also gaining market share against competitors.
However, following the third-quarter results, it has become evident that all three criteria are not being met as expected.
The performance of Tinder has been particularly disappointing, with a year-over-year decrease in paying users for seven consecutive quarters, including the fourth quarter of 2024. Furthermore, Hinge's fourth-quarter results not only missed analysts' expectations but also showed the first instance of flat quarter-over-quarter revenues, signaling more profound challenges within the dating industry.
Despite the setbacks, the analyst acknowledged some positive aspects of Match Group's recent performance. The company's margin exceeded Street expectations by 1.3%, and there was notable share buyback activity, with Match Group repurchasing 2.5% of its float during the third quarter.
For a detailed overview of Match Group's third-quarter results and the forward-looking guidance, interested parties are directed to page 3 of the BofA Securities report.
In other recent news, Deutsche Bank (ETR:DBKGn) has reiterated a Buy rating on Match Group, with a conservative stance on Tinder's revenue projections, slightly adjusting estimates downward for the third quarter. KeyBanc Capital Markets maintained its Overweight rating on Match Group, citing strong overall user engagement despite slower improvements in à la carte features.
Piper Sandler also maintained its Overweight rating on Match Group shares and acknowledged the upcoming CFO transition in March 2025, viewing it as a significant development. These are among the recent developments for Match Group.
InvestingPro Insights
While BofA Securities has downgraded Match Group (NASDAQ:MTCH) to Neutral, recent data from InvestingPro offers a more nuanced perspective on the company's financial health. Despite the challenges in user growth, Match Group maintains a strong financial position with a P/E ratio of 13.22, suggesting the stock may be undervalued relative to its earnings. This is further supported by an InvestingPro Tip indicating that the company is trading at a low P/E ratio relative to its near-term earnings growth.
The company's financial strength is also evident in its profitability. Match Group reported a revenue of $3,485.43 million over the last twelve months, with a robust gross profit margin of 72.44%. An InvestingPro Tip highlights that the company has been profitable over the last twelve months, aligning with analysts' predictions of profitability for the current year.
Interestingly, management's aggressive share buyback activity, as noted in the BofA Securities report, is confirmed by another InvestingPro Tip. This strategy could potentially signal management's confidence in the company's long-term prospects despite current headwinds.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide valuable insights into Match Group's financial outlook and market position.
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