If there’s one thing I’m truly grateful for in this digital age, it’s internet dating. Without it, I would have extremely limited contact with women. Companies like Match Group Inc (NASDAQ:MTCH) give intellectuals a fighting chance.
That said, I can personally attest to the early challenges of online dating, primarily, that no one talked about it. This was a new frontier in human relationships. And truth be told, a stigma was associated with the overall market.
But with the advent of social media, it became more acceptable to be online than off. The rousing success of Facebook Inc (NASDAQ:FB) — and on a member-engagement perspective, Twitter Inc (NYSE:TWTR) — are prime examples. Online dating became a natural evolution.
Today, Match Group advertisements are all over the TV and internet. MTCH stock, in turn, is one of 2017’s winning investments. But how will it respond when the company releases its earnings report after the closing bell on Tuesday?
Match Group Earnings Preview
For the first quarter of fiscal year 2017, MTCH stock is expected to hit an earnings per share target of 12 cents. This is close to the high end of the consensus spectrum, which consists of 32 cents at the top and nine cents at the bottom. Match Group investors have good reason to be optimistic. In the year-ago quarter, the per-share earnings forecast was eight cents, but the actual figure came in at 11 cents.
My former music teacher once told me that if I were to write a song, to write about love. He explained that love is a moneymaker in the music business. That’s also apparently true for financial investing. Since its initial public offering in late 2015, MTCH stock has always beat its EPS estimate by a wide margin. On average, Match Group shareholders can expect an earnings surprise of nearly 22%.
Another attribute that investors are loving about MTCH stock is its sales trend. Annually, revenue has grown at an average rate of 14.5% since 2012. Over the past four quarters, that figure jumped to nearly 20%. Also in that time frame, sales growth either met or exceeded analysts’ expectations.
Of particular note is that Match Group is advantaging seasonality dynamics in the dating industry. It’s no secret that the holidays trigger loneliness among several singles. It’s during this time that MTCH registers its strongest sales. Furthermore, research indicates that the first Sunday of the new year sparks increased memberships for dating sites.
If so, it adds to the growing pile of evidence that MTCH stock will again have a standout earnings report.
Business Is Booming for MTCH Stock
Regardless of the actual results for MTCH, the online dating market is inarguably big business. For starters, the sector is no longer considered a fringe element consisting exclusively of nerds. Indeed, most of the cool people today are nerds — “Game of Thrones,” anybody?
One of the most dramatic changes that have occurred over the past few years is online dating normalization. As the commercials from Match Group suggests, it’s weird not to have your profile uploaded.
The numbers back up this assertion. According to Statistic Brain, roughly 54.3 million singles live in the U.S. From there, nearly 49.3 million have tried dating sites like those offered by Match Group or Spark Networks Inc (NYSEMKT:LOV).
An even bigger tailwind for MTCH stock is the longer-scale conversion rate of online daters. The average single spends $243 a year on Match Group and similar services. Users who leave within the first 90 days of signing up only account for 10% of the base clientele. In a way, dating sites are a drug. Most people relentlessly search until they get a solid hit.
Bottom Line on MTCH Stock
Click to Enlarge Whatever the industry is doing, it’s working. On a year-to-date basis, MTCH stock is up 12%. Since its IPO, MTCH has returned 26%. This is perfect for the risk-averse, steady-as-she-goes crowd.
Dating is a tried-and-true art, just like the “three-day rule.” You never want to rush a good thing.
For MTCH stock, the financials are solid, and the technicals are moving in the right direction. But the biggest factor is the industry. Simply put, Match Group won’t ever run out of customers.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.