Will you swipe right on Match Group (NASDAQ:MTCH) stock and buy it, or swipe left and reject it? As reports surface of an activist investor taking a big position in Match Group, I am bullish on MTCH stock and expect it to be a surprising winner this year.
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Texas-based Match Group is known for its Tinder dating app. However, the company also owns Hinge, which targets relationship-seeking daters rather than people just seeking “hookups.”
As we’ll discover, Match Group had its share of setbacks in 2023. On the other hand, there’s a well-heeled investor who might be able to turn Match Group around. So, let’s conduct our due diligence and see if MTCH stock is a match for your portfolio.
Could AI Put Match Group Back on Track?
Match Group stock topped out at around $170 in 2021, back when interest rates were low and speculative fervor ran high. The shares are much lower in price now, and some traders might wonder whether Match Group will ever get back on track.
In Match Group’s favor, the company is profitable and even posted three consecutive quarterly EPS estimate beats. Thus, Match Group isn’t in terrible shape or about to go bankrupt.
On the other hand, as TipRanks contributor Amit Singh pointed out, Match Group’s paid membership count has declined. Specifically, Match Group’s total paying members declined 5% year-over-year to 15.7 million at the end of 2023’s third quarter.
Furthermore, Tinder accounts for most of Match Group’s revenue, and Tinder’s paying membership declined 6% year-over-year. Plus, Tinder lost 56,000 paying members quarter-over-quarter in the third quarter of 2023.
Yet, Match Group might be able to leverage the power of machine learning to boost its base of paying members. TipRanks contributor Joey Frenette picked out two stocks that could benefit from AI, and MTCH stock is an unexpected but well-supported pick.
Reportedly, Match Group is working on AI technologies behind the scenes, and Tinder currently has an AI-enabled tool to help users pick their best photos. It will certainly be interesting to see what AI-powered features Match Group and Tinder might come up with next.
It won’t surprise me at all if Match Group comes up with an AI bot to revise members’ profile descriptions or even completely write them from scratch. This could be a feature for paying members – it’s just an idea, and we’ll have to wait and see how Match Group capitalizes on the generative AI trend.
Before getting into the headline story about Match Group, I should also mention that JPMorgan Chase (NYSE:JPM) highlighted MTCH stock as a top internet stock to own in 2024. According to TheFly, JPMorgan expects that the EU Digital Markets Act “could be a positive catalyst in 2024” for Match Group.
Moreover, JPMorgan cited Match Group’s “undemanding valuation.” That’s a debatable point, though, as Match Group’s GAAP-measured trailing 12-month price-to-earnings (P/E) ratio of 21.4x is higher than the sector median P/E ratio of 17.3x.
Activist Investor Invests $1 Billion in Match Group
Now, here’s why Match Group is suddenly in the financial headlines. Reportedly, activist investor firm Elliott Investment Management has taken a $1 billion stake in Match Group.
This certainly represents Elliott’s confidence in Match Group’s future prospects. However, when an activist investor firm takes a large financial position in a company, it probably wants to change and improve that company.
It’s not yet known exactly how Elliott would change Match Group. Yet, it’s very likely that there will be changes, as the activist investor firm plans to “discuss ways to turn” Match Group’s “performance around,” according to a Barron’s report.
A Match Group spokesperson stated, “Our team regularly engages with investors, and will continue to work to create great experiences for our users and value for our shareholders.” That’s a vague statement, so apparently, Elliott Investment Management isn’t currently prepared to provide specific details on how it will transform Match Group. One thing’s for sure, though – Match Group needs to find creative ways, with or without AI, to stop paying users from leaving Tinder.
Is MTCH Stock a Buy, According to Analysts?
On TipRanks, MTCH comes in as a Moderate Buy based on 12 Buys and six Hold ratings assigned by analysts in the past three months. The average Match Group stock price target is $43.76, implying 12.4% upside potential.
Conclusion: Should You Consider MTCH Stock?
Whether Match Group’s valuation is “undemanding” is a matter for debate. At least, it can be said with confidence that Match Group stock is far below its 2021 peak price. Maybe Match Group’s technology team will come up with some cool generative AI features to convince paying members to stay on Tinder.
Best of all, Elliott Investment Management might have some ideas to set Match Group on the path to a turnaround in 2024. Consequently, while it’s likely not appropriate for a large position size, I believe MTCH stock deserves consideration for a small, somewhat speculative purchase.
