Contributed by: kellyseal on Friday, September 30 2022 @ 08:39 am
Last modified on Friday, September 30 2022 @ 08:44 am
The share value for dating app conglomerate Match Group was downgraded from buy to hold in mid-September by a Wall Street analyst who projects the company will fall short on revenue goals until the end of the year.
According to Seeking Alpha, Loop Capital Analyst Laura Champine said Tinder remains a “wildcard” on the heels of Renate Nyborg’s exit from the company, the app’s market share losses to Bumble, and “cannibalization” of Tinder by the company’s other star app Hinge. She also lowered her price target from $70 to $60 a share, adding that “we see potential for further misses” going into the next quarter.
Champine added that CEO Bernard Kim will be able to “bring in exciting talent” from outside the company, which she takes as a promising sign. Still, she said of the company’s star app: "Tinder has not been executing in line with expectations…Match blamed Tinder for its lower outlook overall and said product launches had been poorly executed of late. The brand needs to do a better job attracting new customers," according to Seeking Alpha[*1] .
Match Group had a rough second quarter earnings report with earnings lower than expected and revenue projections lowered through the end of the year. The company also made some surprise announcements, including Nyborg and other Tinder executives being replaced, as well as halting its virtual currency feature Tinder Coins pending further analysis. Match Group acquired social networking company Hyperconnect and had initially announced its intention to expand its dating platforms into the metaverse before the news broke. CEO Kim noted that some revenue losses resulted from the faulty launch of Tinder Coins last year.
Champine said in her notes about the downgrade: "MTCH's CEO Bernard Kim is impressive in person, but this level of management turnover will potentially create a speed bump to growth.”
Match Group has also been initiating lawsuits against Apple and Google for their App Store and Play Store practices, respectively. The Stores charge app developers like Match Group a substantial fee for every in-app purchase, as much as 30 percent, and won’t allow third party payment systems. In essence, the platforms redirect revenue away from developers and do not allow them insight into any billing issues that arise from customers – and losing revenue is not a good thing for Match Group right now.
Match Group urged regulators in The Netherlands to investigate these practices, who fined Apple over $50 million before the company agreed to allow third party payment systems, but only for dating apps in The Netherlands. Now, Match Group is extending the fight to Europe, and has filed complaints against Google’s platform as well.
According to The Motley Fool, investors should reconsider if they are thinking of divesting in Match Group. Facing a recession, less than great foreign exchange rates, a war in Ukraine, and consumer spending down globally, it might be a good time to buy, because the growing demand for dating apps means the dating market will eventually bounce back. “I think you could spin this as bullish for the resiliency and secular growth of the online dating market,” The Motley Fool said.