Stock Story -
What Happened: Shares of dating app company Match (NASDAQ:MTCH) jumped 12.5% in the afternoon session after the company reported second-quarter earnings results. Although it continued losing payers, its Tinder monthly active users stabilized while its payer declines slowed. This was an encouraging data point for the market as it's laser-focused on Tinder payers. Hinge did the bulk of the heavy lifting during the quarter, with the product achieving +48% y/y growth. Match expects to see a sequential improvement in payers next quarter. However, Q3 sales are expected to reflect the company's exit from live streaming services (estimated at roughly $8 million) and FX-related headwinds. Overall, this was a decent quarter for Match.
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What is the market telling us: Match Group (NASDAQ:MTCH)'s shares are quite volatile and over the last year have had 9 moves greater than 5%. But moves this big are very rare even for Match Group and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 15 days ago, when the company gained 9.9% on the news that activist investor Starboard Value revealed a 6.6% stake (roughly 17.6 million shares) in the company and pushed for a potential sale if a turnaround can't be achieved. According to the letter released by Starboard "Match is a high-quality business in a secularly growing industry and is deeply undervalued."
As a result, the activist investor outlined value-creation opportunities. Starboard proposed a more accelerated share buyback program and recommended using 75% or more of free cash flow, plus additional borrowing capacity, to buy back shares. This will be catalyzed by the recommendation to boost growth (address issues with Tinder and capitalize on growth at Hinge) and operating leverage. Overall, the news highlights the hidden value that can be unlocked by Match in the coming quarters.
Match Group is up 5% since the beginning of the year, but at $38.27 per share it is still trading 18.3% below its 52-week high of $46.87 from August 2023. Investors who bought $1,000 worth of Match Group's shares at the IPO in June 2020 would now be looking at an investment worth $361.88.
