The report, by investment research firm Topeka Capital Markets, says the industry has returned to a state of secular growth, despite being once thought of as mature.
It attributes this to factors like the growth of mobile, an increasing number of singles and the loss of stigma, as detailed in the Pew Research report last year.
Victor Anthony, Topeka’s managing director of Internet media and the author’s report, said: “The rise of singles and the increasing use of social media, which has reduced the negative stigma once associated with finding a partner on the Internet, coupled with a general trade down in the economy, is driving the industry back to secular growth, in our view.
“Furthermore, the rising adoption of mobile devices, and correspondingly mobile apps, has increased the convenience factor and time spent with online dating services, helping to drive the industry back to meaningful growth.
“The result of a return to secular growth should be more private companies accessing the equity capital markets to capitalize on that the growth, further industry consolidation, and increased funding by financial sponsors.”
Topeka is encouraging investors to take advantage of the market’s potential and specifically recommends investing in Match.com.
It says: “As the leader in the industry, Match.com is best positioned to capitalize on the growth resurgence, in our view.
“Match is the king of paid subscribers, with two times more paying subscribers than the next highest competitor, which is based in China.”
This recommendation comes in anticipation of a probable Match spin off – following the creation of Match Group last December – coupled with the huge potential of monetising Tinder, also an IAC product.
Anthony said: “The site is not being monetized but we see Match layering ads onto the site in between the swipes, both graphic as well as video, leading to an enormous revenue opportunity for Match.com.
“In addition, the founders have implied that they could move the model to other non-dating business services.”
The research firm predict that the popularity of apps like Tinder will also help to strengthen investment opportunities for the future.
As IBISWorld’s Jeremy Edwards said in a report last week:
“Mobile services are forecast to be the fastest growing segment over the next five years as operators, including Interactive Corp. and eHarmony, cater to consumers moving toward easy-to-use mobile applications.
“Users are most likely to be attracted to simple applications and interfaces, so businesses that are able to entice consumers with new and exciting mobile functionality will be the most successful.”
Topeka has increased their price target of IAC shares from $78 to $98.
Read Topeka’s report here.