Oppenheimer Swipes Left: Match Group Downgraded On Rich Valuation

Online dating website operator Match Group Inc MTCH reported strong revenue growth in the third quarter, although its adjusted earnings trailed the consensus. The stock's price undermined sell-side sentiment.

The Analyst

Oppenheimer analyst Jason Helfstein reviewed the company's quarterly results.

The Rating

Oppenheimer downgraded the stock from Outperform to Perform and removed its $22 price target on the shares.

The Thesis

Match's business is firing on all cylinders on the strong performance of Tinder Gold, a return to growth for OkCupid and Match America and the tapering of the pace of the affinity run-off, Helfstein said, offering his take on the company's quarterly results. (See Helfstein's track record here.)

Notwithstanding optimism on the fundamentals, Helfstein said he's put off by the strong run up in Match shares since second-quarter results were reported.

Fourth-quarter revenue was guided above the consensus and its estimates, according to Oppenheimer. The firm adjusted its EBITA projection to 2 percent below its estimate, but in line with Street forecast, and moved EBITDA margins below estimates on higher anticipated marketing.

See also: Jefferies Swipes Right On Match Group, Says Tinder Is The Asset To Watch

Citing the incremental "Likes You" conversion, the Tinder Gold ARPU ramp and OkCupid and North American Match growth, Oppenheimer increased its 2017 and 2018 revenue estimates by 3 percent and 6 percent, respectively. The EBITDA estimates for the periods were also hiked by 1 percent and 2 percent, respectively.

Oppenheimer also increased its GAAP earnings per share estimate for 2017 by 95 percent on a one-time $226 million tax benefit on 2016-09 Tinder option conversion.

The Price Action

Match shares have gained over 65 percent in the year-to-date period.

After rallying 10 percent on Wednesday in reaction to the earnings, the stock is cooling off. At last check, Match shares were down 2.43 percent at $28.87.

Related Link:

Match Group's Tinder Well Positioned in The Online Dating Market; Citi Initiates At Buy

Photo courtesy of Tinder.