Ticker: MTCH. Not financial advice.
Introduction & management
Match Group “recently” changed their CEO (among other leadership changes), and as he stated during the Q2 earnings call: “Tinder needs a lot of work. It has grown stale because of short term monetization & lack of innovation.” Additionally, there is a general slowdown in the online dating market.
profitability
On the other hand, Match Group has a reasonably profitable business, with an net income / non-current assets ratio of 19% and an net income / revenue ratio of 18%. Furthermore, the new CEO has been making the company more agile, partly by laying off 20% of managers and reducing team sizes; and furthermore by increasing focus on product development. Established dating companies like Tinder benefit from strong network effects.
balance sheet & capital allocation
Match Group has negative equity, and half of their assets consist of goodwill. Their MAU (Monthly Active Users) has been declining since 2022. Furthermore, Match Group acquired HyperConnect in 2021 at what appears to be an overly optimistic price, leading to massive write-downs.
But even with Match Group’s negative equity and high proportion of goodwill, they are executing significant share buybacks. This can be explained by a low interest compared to earnings yield 6,5%. This indicates a shareholder-friendly and aggressive capital allocation strategy that also suggests management believes the company is attractively priced (or he is signalling to the shareholders -> no more expensive acquisitions!).
Note: Match Group has a net income / (liabilities + goodwill) ratio of 8,7%.
market
User sentiment across the industry is historically poor, driven by a perception that dating apps profit from keeping users single. The new CEO has signaled a strategic shift toward brand health, stating, “I would take a positive word of mouth over a $15 subscription any day.” This marks a essential pivot from short-term extraction to long-term value.
Note: Match Group’s declining MAU stems from the Evergreen segment and Tinder, whereas Hinge is experiencing impressive growth.
Conclusion
In my opinion the “new” ceo, seems to be doing the right things. The stock is priced for stagnation – and in my optic – that might just be a tad too pessimistic – even with a historic horrible capital allocation and a trash balance sheet.
Disclaimer
Not financial advice – always do your own due diligence.
I can have made mistakes. I have shares in Match Group.
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