Match Group Still Has Room to Grow

The post-pandemic recovery has not been easy for many high-growth companies. Despite showing healthy profitability, Match Group (MTCH) shares have dropped 30% so far this year, which makes it one of the worst-performing growth stocks this year.

Match Group is the clear leader in the online dating industry with more than 45 global online dating brands including Match, Tinder, Meetic, OkCupid, and OurTime.

The company has more room to grow as the online dating industry is still in its infant stage in many global regions, especially in developing countries.

The decline in the stock price presents growth investors with a good opportunity to consider, and I am bullish on the prospects for the company.

Continuing to Grow despite Short-Term Challenges

Match Group’s total revenue increased 24% year-over-year to $806 million in the fourth quarter of 2021, with Tinder Direct Revenue increasing by 23% and All Other Brands Direct Revenue increasing by 26%.

However, the company fell short of Wall Street estimates in most areas. The rise of the Omicron variant had a negative influence on the performance, particularly in select Asian markets such as Japan.

Despite these challenges, total payers increased 15% to 16.2 million, with revenue per payer rising 8% to $16.16. For full-year 2021, the company reported total revenue of $2.9 billion, up 25% year-over-year with Tinder generating $1.7 billion, and other brands — both emerging and established — generating $1.27 billion in direct revenue.

The MTCH earnings report did little to boost the confidence of investors, as the company reported a loss for the fourth quarter.

Product Portfolio Continues to Evolve

Match Group is devoting substantial efforts to improving the appeal of its dating products. The company has introduced various new features such as Tinder Explore Experiences, allowing users to connect over a shared interest. This feature is supporting Tinder’s growth, with higher levels of adoption among Gen Z, international users, and paid members.

Hinge is expected to become the world’s second-largest dating app in a few years, and in 2021, the app’s revenue more than doubled to $197 million as the company began to monetize its user base in the United States and other English-speaking markets.

According to App Annie data, Hinge has become the second most downloaded dating app in many English-speaking countries, including the United Kingdom, since New Year’s Eve.

Hinge’s expansion into non-English speaking countries is currently the company’s primary focus, with plans to launch in certain European countries in the second quarter of 2022.

The dating industry, like every other industry, is now embracing the Metaverse. Match Group acquired Hyperconnect, a South Korean video, AI, and AR technology company, in June 2021, offering the dating giant an opportunity to reach out to a new generation of digital users.

The company launched live streaming, an interactive discovery experience, and online video cafes for its numerous apps using Hyperconnect’s technology recently.

Match Group has not revealed any specifics about its plans for Metaverse in the dating world, but the company management views the Metaverse as an opportunity to capitalize on the world of digital avatars.

In South Korea, Japan, and other Asian markets, Hyperconnect’s app Hakuna live already provides group live video and audio services, as well as avatar-based streaming.

With Hyperconnect, Match Group is putting a greater emphasis on the Japanese and Korean markets. In the long run, the company is certainly well positioned for substantial expansion in the Asia market, which could turn out to be the growth machine for Match Group in the next decade.

Commendable Portfolio Diversification Efforts

Hawaya, an exclusive dating platform for Muslim singles, is quickly gaining traction in the Middle East, and Match Group’s decision to acquire this platform in 2019 seems to be paying off.

The company offers dozens of dating products aimed at different social groups, and this diversified portfolio is its biggest strength.

On March 21, the company launched Stir, a dating app for single parents. The new release aims to address the 20 million single parents in the United States, allowing them to overcome the difficulty of coordinating a time to find a suitable partner or date.

With in-app features, users can show which days of the week and times they are typically free, so that they can be matched with other users with similar schedules. Stir generates revenue through subscriptions and offers a freemium experience, enabling users to use the app and message for free, while also having the opportunity to subscribe to paid services.

When it comes to online dating, user security and safety are also critical, and Match Group recently invested in Garbo, a background check service that is available to the general public in the United States, and is integrated into Tinder via Tinder’s Safety Center.

Conclusion

The online dating industry has a long way to go, and Match Group remains laser-focused on developing innovative solutions to lure more users to its platforms.

The company is also likely to benefit from the expected reduction in mobile app store fees charged by popular smartphone makers.

Match Group’s dominance in the online dating industry is likely to help the company earn economic profits in the foreseeable future, which makes the recent decline in stock price a good opportunity to consider investing in its stock.

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