Strong Earnings Confirm Match Stock as a Long-Term Winner

Match (NASDAQ:MTCH) stock popped in early November after the online dating giant reported third-quarter numbers that smashed estimates. Match stock’s earnings broadly underscored an accelerating growth trajectory for the company as we exit the worst of the economic impact of the Covid-19 pandemic.

mobile phone screen displaying match group's (MTCH) logo
Source: Shutterstock

Specifically, Match’s subscriber growth numbers accelerated in the quarter; revenue growth rates rebounded to pre-Covid levels, and margins meaningfully expanded after briefly flatlining last quarter.

Against that backdrop, it makes complete sense that MTCH stock popped after the earnings report.

It also makes complete sense that Match will keep rallying for the foreseeable future.

In the big picture, Match is a long-term winner that is turning into the unstoppable 400-pound gorilla in the booming online dating space. And over the next several years, as this space continues to grow by leaps and bounds, Match will continue to grow by leaps and bounds, too.

As it does, Match’s stock price will keep grinding higher.

So put this name on your long-term “buy and hold” list. It’s a winner that will keep on winning.

Strong Earnings for Match Stock

Match’s third-quarter earnings report was very strong.

As it turns out, young consumers — many of whom work in the service sector which was hit hard by economic shutdowns in the second quarter — cut back on paying for online dating in the early days of the pandemic. But, as the economy has slowly normalized and the service labor market has recovered, many of those young consumers got their jobs back, and reupped spending on online dating.

Match added 733,000 subscribers in the third quarter of 2020, miles more than the 149,000 the company added in the second quarter of 2020. Perhaps more importantly, this surge in user growth set the stage of reaccelerating revenue growth. Match’s third quarter revenues rose 18% year-over-year, versus 12% in the second quarter, and back to where revenue growth rates were pre-Covid.

One could very reasonably argue that going forward, Match’s growth rates will accelerate even further.

The reality is that Covid-19 has forced consumers to engage with digital products and services more than ever before, including online dating. Sure, as the economy reopens in 2021/22, many of us will go back to doing physical things and going on physical dates. But most of us will also like retain higher-than-normal engagement in the digital channel, because things like online dating and e-commerce shopping have simply become engrained into our lifestyles.

To that end, I fully expect Match’s numbers to only get better from here as we head into 2021. So long as those numbers keep getting better, MTCH stock will keep pushing higher.

The Facebook of Dating

For all intents and purposes, Match is the Facebook (NASDAQ:FB) of the dating world.

Facebook developed and acquired a suite of social media apps which today constitute four of the most used social media apps in the world, and the company is presently the unrivaled global giant in social media.

Similarly, Match has developed and acquired five of the six most popular online dating apps, including, Tinder, OKCupid, Hinge, and PlentyOfFish, with many emerging dating apps — like Chispa and BLK — in the pipeline.

In other words, Match is the unrivaled global giant in online dating.

That industry is growing rapidly, as consumers are increasingly digitizing dating. About 30% of Americans have used an online dating app before. That number is rising. So is the number of consumers who are willing to pay for premium online dating services. Perhaps more importantly, the potential for this market is enormous, because there are a lot of single people in the world, almost all of them date, and not many of them use online dating today.

Net net, Match is the Facebook of a hypergrowth online dating market with significant long-term potential.

Sound like a winning recipe for MTCH stock?

It is.

Big Long-Term Potential for Match Stock

Thanks to its favorable competitive positioning in a booming market, Match has big long-term profit growth potential over the next decade.

Over the next 10 years, online dating usage will continue to rise at a healthy pace and Match will continue to expand its portfolio of apps into international markets. As that happens, the company should be able to sustain double-digit subscriber growth.

On top of that, average revenue per subscriber should march higher at a low single-digit pace as Match rolls out more and more upsell features across its various online dating apps, powering what should be somewhere around ~15% revenue growth.

That’s enough revenue growth to drive meaningfully positive operating leverage in this highly scalable, software-centric business model, since Match’s expenses will probably only need to rise at a ~10% pace to support ~15% revenue growth.

Net net, Match should be able to power ~20% profit growth over the next 10 years.

Assuming so, my modeling pegs Match’s 2030 earnings power at around $10 per share. Interactive media stocks normally trade around 22X forward earnings. Based on that normal multiple, MTCH stock could soar to $220 by the end of the decade.

Bottom Line on MTCH Stock

Match is a long-term winner that should be on your “buy-and-hold” list.

Buy MTCH stock today. Forget about it for a few years. Check back in 2024 or 2025, when online dating is globally ubiquitous and Match’s dating apps are used by everyone, everywhere. The MTCH stock price will be much, much higher at that point in time.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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