Seeking Alpha Offers 10 Reasons to Buy MTCH

19th April 2018 Scott Harvey

A Seeking Alpha analyst has offered 10 reasons why investors should look at buying Match Group stock (MTCH).

First, it says the mobile online dating industry is growing at a formidable rate, and Match Group has transitioned very effectively from desktop. Tinder was the second highest grossing non-gaming app in 2017 (behind Netflix).

Second, Match Group has limited competition. Its only notable competitor is said to be Bumble, but Bumble “is still a niche product with only 3% of the market in 2017 and is barely used in non-English speaking countries”.

Third, and on a related note, there is “no Pepsi to Tinder’s Coke”. Match is best thought of as the dating equivalent of YouTube in the video sharing market, or LinkedIn in the professional networking space.

Fourth, its employees are content and give positive reviews of the company. CEO Mandy Ginsberg has a 98% approval rating on Glassdoor, and is tenacious in her defence of Match products.

The ongoing lawsuit between Tinder and Bumble, the author feels, is likely to benefit Match Group in the long term.

Next, Tinder has a number of ways to increase revenue that are not all open to its competitors to the same extent. Its international footprint is unique in the industry, as is its potential to expand into new markets and grow its user base.

Ginsberg takes a conservative approach to monetisation, focusing on these advantages: “I know many investors are focused on our next monetization release, but as we’ve said before the biggest drivers of long-term revenue growth are free features that make Tinder simple, fun and a useful product, creating a vibrant community of users that in turn drive word of mouth.

“This focus on the customer is key in driving new users as well as keeping our customers engaged. The success of Gold allows us to focus on developing features that make the overall product experience better for our entire user base.”

The sixth reason to invest is that Tinder can host additional users and scale at relatively low cost. The nature of its service means that it can be replicated across more and more devices.

Seventh, it is becoming increasingly difficult for new entrants in the online dating space. A combination of regulation, high R&D spend and complex advertising models make an overnight crisis at Tinder unlikely.

Eighth, Match has a good record when it comes to mergers and acquisitions. POF and OKC have both been worthwhile projects. Match is good at identifying useful acquisitions and executing them, and they can exert an enormous amount of pressure on competitors.

Ninth, Match’s price is appreciating rapidly. Many analysts are starting to realise how ubiquitous dating apps are likely to be in the future, and many are banking on Match as the company set to profit.

Lastly, “What matters isn’t where Match Group valuation will be next month, rather if it can sustain a market-beating performance for the next five years and beyond. And we believe that looking at valuation today is almost irrelevant, thanks to the multiple macro tailwinds and long-term prospects.”