Match beats the Street on earnings and revenue, but weaker than expected guidance sends the share price down
The world’s largest online dating company, Match Group, reported third quarter earnings this week. Investors should be pleased to see that the company’s ‘superstar’ product (casual dating app Tinder) continues to push it from strength to strength, delivering a beat on the Street’s top- and bottom-line estimates. However, despite impressive results and solid fundamentals, Match Group’s share price declined on the back of the results. Why? As we’ve seen a few times this earnings season, weaker than expected guidance.
Even after taking a hit on the back of earnings, Match’s share price has risen by 37% year to date
Source: Yahoo Finance
On Tuesday, Match Group reported adjusted earnings per share of 39 cents. That’s a beat against the Street’s predictions of 35 cents. The company also beat on revenue, which rose by 29%, year on year, to $444 million (expectations were for revenues of $438 million).
Driving these financials was the ever-increasing popularity of ‘casual dating’ app Tinder. With its focus on hook-ups, rather than serious relationships, and its easy to use, gamified, style, Tinder has been a massive success with younger daters. In the quarter ended September, growth doesn’t seem to have slowed. Tinder added 344,000 users in the third quarter of 2018, bringing its total to 4.1 million. On average, analysts had expected 300,000 new users (the same pace of growth that Tinder showed in the previous quarter).
In other news from the quarter, Match’s CEO, Mandy Ginsberg, said that the company wouldn’t be backing off from its lawsuit with rival Bumble, was planning to push dating app Hinge beyond New York (where it’s become increasingly popular), and was looking at ways to make Tinder Gold better and increase engagement further.
In a comment, Ms. Ginsberg said: “Match Group delivered another quarter of strong top and bottom line growth, with Tinder continuing as our growth engine. We are making product and marketing investments in our brands to drive growth across our portfolio. Even with these investments, Match Group is generating significant free cash flow and reducing leverage levels, and we have returned a meaningful amount of capital to shareholders. Today, we are announcing that our Board has declared a special dividend of $2.00 on each share of Match Group common stock and class B common stock. We remain on the lookout for strategically compelling M&A and have the financial flexibility to acquire companies when we find innovative products with long-term potential.”
Dominion holds Match Group in its Global Trends Ecommerce Fund.
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