Match Group (MTCH) stock has gained 4% today and is trading at $77.33. According to today’s MarketWatch report, two investment banks have turned bullish on Match. The report states that Deutsche Bank analyst Kunal Madhukar upgraded the stock from “hold” to “buy.” Madhukar noted, “Despite a strong quarter and the raise that came with it, Match shares have virtually been in free fall since the company reported 2Q results.”
Madhukar added, “In our view, while there is potential for near-term trading dislocation and the specter of increased supply once IAC decides to spin off Match (where a decision could be announced shortly, and the process could take six to nine months), we think the overreaction to Facebook Dating coming to the US or the FTC lawsuit against Match.com is exactly that – an overreaction.”
Instinet analyst Mark Kelley also upgraded MTCH stock from “neutral” to “buy.”
What impacted MTCH stock recently?
Founded in 2009, Match Group has a strong portfolio of dating products and applications. Match’s product portfolio includes Hinge, Tinder, OkCupid, and PlentyOfFish. The stock was publicly listed in November 2015 and has gained 406% since its IPO. MTCH stock has risen a significant 81.5% this year.
MTCH gained significant value after its second-quarter results. However, it has declined 20% since August, driven by market weakness and after Facebook (FB) announced its foray into online dating. The social media giant has the largest Internet customer base that can be monetized.
Facebook has confirmed that its dating service is free and is debuting in North America. However, analysts such as Madhukar don’t see Facebook as a major threat for MTCH just yet.
Could Match stock move higher?
According to this July 19 Bloomberg report, Match Group is trying to bypass Google Play’s (GOOGL) payment systems. The report states that MTCH launched a default payment system for subscribers in which they would enter their credit card details directly into the dating application platform.
The Google Play Store and App Store provide platforms for millions of developers to launch their applications, and they charge up to 30% in subscription revenue. This move could help Match Group improve its profit margins over the next few quarters.
Driven by the significant rise in its stock price, MTCH stock is now trading at a forward price-to-earnings multiple of 37.3x. It is valued at $21 billion, which is 10.5x its 2019 sales. Comparatively, its earnings are expected to rise 16.8% in 2019, 18.4% in 2020, and at an annual rate of 17.4% in the next five years.
Looking at its earnings growth and PE multiple, the stock looks overvalued by at least 40%. Investors can expect the stock to trade lower in a downturn.
Analysts remain optimistic about Match, giving the stock a 12-month average target price of $90, indicating an upside potential of 16%.