Stock Analysis & Ideas

These stocks are down 50% this year, but insiders are buying more

Every investor knows that the path toward profits lies in buying low and selling high. That’s a basic precept of any economic trading system. The trick, however, is recognizing when the stock is low enough to buy in. The prime moment to buy is when the stock hits bottom; that will maximize returns when the share price starts to rise again.

There are a multitude of possible clues investors can use to find the price bottom; today, we’ll be looking at insider buying trends.

Insiders – the corporate officers, board members, and others ‘in the know’ – don’t just manage the companies, they know the details. Legally, they are not supposed to trade that knowledge, or to blatantly trade on it, and disclosure rules by government regulators help to keep the insiders honest. Their honest stock transactions, however, can be highly informative. These are the people with the deepest knowledge of particular stocks. So, when they buy or sell, especially in bulk, take note.

In this case, we’ve used the TipRanks Insiders’ Hot Stocks tool to find two stocks whose price has dropped significantly this year – and that drop has coincided with some ‘informative buy’ insider trades. Let’s take a closer look.

Match Group (MTCH)

We’ll start with Match Group, a holding company in the online dating world. Match Group owns and operates an array of dating sites, and its portfolio includes field leaders such as Tinder, OKCupid, and Plenty of Fish. Match Group introduced the ‘swipe’ feature in mobile dating apps, and offers its online products worldwide, in over 40 languages, for all demographics. Match Group’s Tinder brand is the web’s most downloaded dating app, and the top grossing dating app in the world.

Turning to Match Group’s financial performance, we find that the company saw its revenue and earnings slip from Q1 of this year into Q2 – although the top line remains elevated year-over-year. At $795 million, total revenues were up 12% year-over-year, but the company saw a net loss of $10 million, or 11 cents per share, due to a one-time charge related to last year’s acquisition of South Korea’s Hyperconnect.

That acquisition, which was Match’s largest ever, brought the Azar and Hakuna brands into Match’s universe, and cost the holding company $1.725 billion. The transaction was conducted half in cash and half in stock.

In another major payment, that negatively impacted Match Group’s cash flow during Q2, the company in December settled long litigation with the founders of Tinder. Match Group paid out $441 million, and effectively ended the suit before the jury could take up deliberations. In addition to the settlement of the lawsuit, Tinder’s CEO stepped down last week, and the brand’s upper management is in flux. Match Group hopes that, with new leadership at the top levels, Tinder can return to its position as the company’s revenue driver.

While Match Group has successfully expanded its reach in the online dating niche, the shares are down 50% so far this year. At the same time, Match Group CEO Jin Kim has not been deterred from buying big on MTCH.

Last week, Kim bought 16,000 shares of MTCH, paying out a total of $1.02 million for the stock. His total stake in the company is now valued near $1.16 million. Kim took the helm of Match Group at the end of May this year.

Looking to the future, Piper Sandler analyst Matt Farrell writes: “We continue to like this name given that online dating isn’t going away, and this is the name to own in the space. Tinder is still the most downloaded dating app in the world.”

To this end, Farrell rates MTCH an Overweight (i.e. Buy), and his price target, at $80, suggests the shares have ~21% upside potential for the coming year. (To watch Farrell’s track record, click here)

Wall Street, generally, seems upbeat about Match’s prospects. The stock has 17 recent analyst reviews, which break down to 14 Buys and 3 Holds, for a Strong Buy consensus rating. The shares are trading for $66.27 and their $83.56 average price target implies a 12-month upside of 26%. (See MTCH stock forecast on TipRanks)

PROG Holdings (PRG)

The next stock we’ll look at is PROG Holdings, an interesting firm in the rent-to-own sector. PROG has three business segments, including Progressive Lending, a lease-to-own purchase option product for low-end retail customers seeking to buy appliances, electronics, mobile connected devices, and more; Vive Financial, a financing service for customers who do not quality for prime lending; and Four Technologies, PROG’s fintech payment platform that includes buy-now/pay-later functionality.

At the end of last month, PROG made two important business announcements. The first concerned the financial results for 2Q22. These presented a mix of positives and negatives. At the top line, revenues were down slightly year-over-year, falling ~2% to $649.4 million. At the same time, the company’s non-GAAP diluted EPS of 52 cents beat the 46-cent forecast by a 13% margin.

The second business announcement regards an agreement with Samsung. PROG Holdings’ Progressive Leasing segment, which includes app-based and in-store lease-to-own solutions, has been selected as the exclusive lease-to-own service provider for Samsung.com.

Overall, PROG shares are down 54% year-to-date. The drop, however, has not discouraged Curtis Linn Doman, from the company’s Board of Directors, from increasing his holding.

On August 3, Doman bought 50,000 PRG shares, paying $962,500. Doman now holds shares in the company worth a total of $5.52 million. His purchase was the largest of several insider buys last week, which included two in the $20K to $40K range, as well as $283K worth of purchases by the company’s CEO.

Turning to the analyst commentary, we’ll check in with Jefferies analyst Kyle Joseph, who writes, “A perfect storm of macro factors; hard to envision a more challenging near-term backdrop for VLTO [virtual lease-to-own]. Elevated inflation is weighing on discretionary demand, particularly for low-end consumers, while simultaneously weighing on credit performance as rising gas, food and housing costs disproportionately impact PRG’s customers.”

“While PRG has historically been a relatively defensive name, it is beholden to the underwriting decisions of traditional providers of credit higher up the POS finance waterfall…. At the same time, as retailers struggle in a more volatile backdrop, adding the VLTO alternative to their suite of POS financing alternatives becomes more enticing. So we see the near-term operating environment as challenging for PRG and the entire VLTO space. Longer-term, we still see value in shares,” Joseph continued.

Along with these comments, Joseph gives PRG a Buy rating, and his $36 price target implies a one-year gain of 71% for the shares. (To watch Joseph’s track record, click here)

This stock has attracted a modest amount of analyst attention – a total of 3 analyst reviews, including 2 to Buy and 1 to Hold, for a Moderate Buy consensus. The stock’s average price target is $36, matching Joseph’s above, and indicating a 75% upside from the current trading price of $20.53. (See PRG stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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