Sometimes when we debut a new growth company, it does so well that its valuation becomes an issue, and we don’t get another opportunity to profile it for many years. Match Group, Inc. (MTCH) is one such story, suggests Doug Gerlach, editor of Investor Advisor Service.

The leader in online dating, Match became a public company in April 2016 after roughly 20% of its shares were listed by internet media company IAC/InterActiveCorp. (IAC).

We first reviewed the stock in May 2017 at a price of $17.22. After rapid appreciation, shares continued to sustain a premium valuation and reached $182 in October 2021. The stock has now fallen more than half — providing a rare opportunity to examine the company again.

Over the past 25+ years, Match pioneered connection applications, primarily dating, in over 40+ languages through 45+ brands all over the world. The company estimates that over 60% of relationships started on a dating site or application began on a Match Group brand.

The leading platform, Tinder, was incubated at the company in 2012 and has risen to the #1 dating application in the world. Tinder is used by more than 80 million in a freemium model that provides limited interaction through its famous Swipe Right feature indicating interest.

Other prominent brands include Hinge, focusing on relationship-minded millennials; Meetic, targeting singles over 35 in Europe; OkCupid for progressive city dwellers; and PlentyOfFish that utilizes extensive questionnaires and algorithms to find the perfect match.

Match purchased Hyperconnect for $1.725 billion in June 2021. Hyperconnect is a Korean company utilizing sophisticated one-to-one and one-to-many video chat technology to bring together communities of users with common interests.

Since the acquisition, Hyperconnect technology has been integrated into match, Meetic, Pairs (dating app focused on Japan, Taiwan, and Korea), and PlentyOfFish. The ability to incorporate emerging technologies across millions of worldwide users is a distinct competitive advantage that supports monetization opportunities and operating leverage.

The social media landscape is evolving such that Match has further monetization opportunities. The company is experimenting with virtual worlds, the so called metaverse, where users can congregate in an analogous way to the real world.

An example would be a simulated bar where each user is represented by an avatar. Another opportunity is Electronic Fungible Tokens (EFTs) such as Tinder Coin, a virtual currency that Match will begin selling later this year to support payments between users and content creators.

We think Match can grow its EPS 17% per year. Five years of this earnings growth would imply EPS of $4.52 and, when coupled with our estimated average high P/E of 35, shares could reach $158.

For a low-price estimate, we use trailing twelve-month EPS of $2.05 and multiply by our chosen average low P/E of 26 to generate a low price of $53. The upside/downside ratio is 3.3 to 1 and compounded annual return potential is 15%.

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