On Thursday, Morgan Stanley (NYSE:MS) took over coverage of Match Group (NASDAQ:MTCH), a leader in the online dating industry, assigning an Equalweight rating to the company's shares. The financial institution has set a price target for the stock at $37.00.
The coverage comes with a cautious stance regarding the potential for user growth on Match Group's flagship platform, Tinder. According to Morgan Stanley, Tinder's 2024 roadmap aims to enhance user experience, but the firm expresses low confidence in how quickly or significantly this could lead to an increase in the user base.
Despite the attractive valuation indicated by approximately a 10% free cash flow yield, Morgan Stanley highlights the need for user growth to drive a meaningful re-rating of the company's multiple.
Match Group operates in a substantial total addressable market (TAM), with an estimated 700 million global online singles between the ages of 18 and 65, excluding China. This is underscored by the fact that a majority of U.S. singles actively seeking relationships have not yet turned to online dating platforms.
The firm also anticipates that Hinge, another brand under Match Group's portfolio, will emerge as the next growth driver. Hinge has demonstrated a strong product-market fit and has achieved notable early international traction. Morgan Stanley projects that Hinge will sustain a top-line growth with a compound annual growth rate (CAGR) exceeding 25% over the next five years.
Match Group, with its diverse portfolio of online dating services, continues to navigate the evolving preferences and habits of singles worldwide, aiming to capitalize on the significant untapped market potential.
InvestingPro Insights
Match Group (NASDAQ:MTCH) has been the subject of recent financial analysis, with Morgan Stanley covering the company and setting a price target. For investors looking for further insights, InvestingPro provides real-time data and expert tips that can shed more light on the company's financial health and potential. With a market capitalization of $8.65 billion and a P/E ratio of 13.69, Match Group is positioned with a valuation that suggests room for growth, especially considering its P/E ratio adjusted for the last twelve months as of Q4 2023 stands slightly lower at 13.28.
One of the notable InvestingPro Tips is that management has been actively repurchasing shares, which could be a signal of confidence in the company's future prospects. Additionally, while analysts have revised earnings downwards for the upcoming period, the company is trading at a low P/E ratio relative to near-term earnings growth, indicating potential undervaluation. Match Group's liquid assets also exceed its short-term obligations, providing financial stability.
It's worth noting that Match Group has been profitable over the last twelve months, with a gross profit margin of 71.72% and an operating income margin of 27.25%. These robust margins underscore the company's ability to generate earnings effectively. Furthermore, Match Group does not pay a dividend, which could appeal to investors looking for companies that reinvest earnings back into growth.
For those interested in deeper analysis, InvestingPro offers additional tips on Match Group, which can be accessed at https://www.investing.com/pro/MTCH. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are six more InvestingPro Tips available that can help investors make more informed decisions.
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