On Monday, KeyBanc Capital Markets adjusted its outlook on Match Group (NASDAQ:MTCH), reducing the price target from $50 to $46, while maintaining an Overweight rating on the company's shares. The revision was prompted by a closer examination of customer trends at Match Group's flagship dating app, Tinder. According to KeyBanc's assessment using their Key First Look credit and debit card data, there are indications of stabilization in Tinder's customer trends for the first quarter, despite year-over-year declines.
The analyst from KeyBanc highlighted the importance of the upcoming first quarter earnings reports for both Match Group and competitor Bumble. The reports are anticipated to provide detailed insights into the reasons behind the expectation of trend improvements without negatively impacting profit margins. While Bumble has outlined a clearer recovery path, including an app refresh and restructuring actions, Match Group is expected to face additional challenges in Asia due to foreign exchange headwinds.
KeyBanc's revised price target for Match Group is now set at $46, which is based on 11.5 times the estimated 2025 Enterprise Value to Adjusted Operating Income (EV/AOI). In addition, KeyBanc has also updated its price target for Bumble to $16, which corresponds to 9 times the estimated 2025 Enterprise Value to EBITDA (EV/EBITDA). Both companies retain their Overweight ratings, with the firm expressing confidence that they will stabilize and continue to return more cash to shareholders.
The adjustment in Match Group's price target also reflects a modest reduction in the firm's revenue and Adjusted Operating Income estimates for the years 2024 and 2025. This 1% decrease accounts for the anticipated foreign exchange headwinds and a slower recovery in the number of paying users. The new price target represents the analyst's updated valuation metrics, pegging Match Group at 11.5 times its projected 2025 EV/AOI.
InvestingPro Insights
Match Group (NASDAQ:MTCH) presents a compelling case for investors considering the latest data and insights from InvestingPro. The company's aggressive share buyback strategy reflects management's confidence in its value, as indicated by one of the InvestingPro Tips. Additionally, Match Group's current P/E ratio of 13.45, which adjusts to 13.11 for the last twelve months as of Q4 2023, suggests the stock is trading at a low price relative to its near-term earnings growth potential. This is particularly noteworthy given the company's profitability over the last year and analysts' predictions that it will remain profitable in the current year.
Another point of interest for investors is Match Group's liquidity position. The company's liquid assets surpass its short-term obligations, providing a cushion for operational needs and potential investments. Moreover, with a Gross Profit Margin of 71.72% for the last twelve months as of Q4 2023, Match Group demonstrates strong profitability in its core operations.
While Match Group does not pay a dividend, which may be a consideration for income-focused investors, the company's overall financial health and the potential for share value appreciation should not be overlooked. For those interested in further analysis and additional insights, InvestingPro offers five more InvestingPro Tips for Match Group, which can be accessed through their specialized service. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and delve deeper into Match Group's investment potential.
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