On Wednesday, Citi updated its outlook on Match Group (NASDAQ:MTCH), increasing the price target to $39.00 from the previous target of $33.00. Despite the raised target, the firm kept a Neutral rating on the stock. The adjustment follows Match Group's disclosure of a more distinct product roadmap and a stronger-than-anticipated starting point for Tinder's payer growth inflection as it concludes the second quarter.
The company's performance has set a higher benchmark for the second half of the year, with expectations now more elevated due to the expanded multiples—from 10x to 25x EV/EBITDA—even though guidance has largely stayed the same. The attention now turns to whether Match Group's product development can sustain genuine growth over time.
Match Group's announcement of an expected 250,000 net adds at Tinder in the third quarter is surpassing expectations, indicating a positive trend. However, the firm noted that adapting products to evolving consumer trends will require time, and the visibility on the growth trajectory remains somewhat uncertain.
Citi's commentary highlighted the need for evidence of sustained improvements in the face of what it describes as more challenging secular trends. The firm's stance remains cautious, awaiting more concrete signs of progress before adopting a more proactive position on the stock.
The update from Citi comes as investors seek signs of stable growth in the tech sector, with Match Group at the center of this focus due to its influence in the online dating industry. The company's ability to meet the heightened expectations in the latter half of the year will be closely monitored by stakeholders.
In other recent news, Match Group saw its target raised to $37 by Truist Securities due to growth prospects, particularly for Tinder. The company's Q2 results were slightly better than expected, with higher pricing at Tinder and the strong performance of Hinge being contributing factors. However, Match Group's third quarter and full year 2024 guidance was lowered due to management's decision to withdraw from live streaming ventures and the impact of foreign exchange headwinds.
Despite this, Match Group announced a workforce reduction of approximately 6% amid restructuring efforts. The company's Q2 revenue surpassed Wall Street's expectations, although Tinder's paying user base saw an 8% drop. For the third quarter, Match Group's projected revenue is expected to fall short of analysts' estimates.
Furthermore, Match Group's Q2 2024 results revealed revenue of $864.07 million, exceeding analyst expectations. The company anticipates Q3 2024 revenue to be between $895 million and $905 million, slightly under the consensus estimate of $914.8 million. Despite the entrance of activist investor Starboard Value, Match Group maintained an Overweight rating, with Piper Sandler highlighting the company's robust free cash flow generation as an indicator of its underlying value.
InvestingPro Insights
Match Group (NASDAQ:MTCH) has been navigating the market with a blend of strategic financial health and growth indicators. According to recent data from InvestingPro, Match Group boasts a market capitalization of $10.17 billion and a P/E ratio of 15.98, which adjusts to 13.69 when considering the last twelve months as of Q1 2024. This is in line with the company's low PEG ratio of 0.11 during the same period, indicating potential undervaluation relative to near-term earnings growth.
InvestingPro Tips highlight that Match Group has a perfect Piotroski Score of 9, suggesting a strong financial position, and management's aggressive share buybacks signal confidence in the company's value. Additionally, the company's liquid assets exceed its short-term obligations, providing financial flexibility. For investors seeking further insights, InvestingPro offers additional tips on Match Group's financial health and growth prospects.
These metrics and strategic moves by Match Group's management could provide a foundation for the company's sustained growth, aligning with Citi's outlook for evidence of sustained improvements in the tech sector. With analysts predicting profitability for the current year and a positive earnings outlook, Match Group is positioned to potentially meet or exceed the heightened expectations in the latter half of the year.
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