Ditching Dating Stocks? Barclays Downgrades Match Group

• Match Group Inc MTCH shares have plummeted 26 percent since January 5.
• Barclays’ Christopher D. Merwin downgraded the rating for the company from Overweight to Equal-Weight, while reducing the price target from $17 to $14.
• The environment in dating assets is difficult and an improvement in user experience and Direct Ad Force Construction will take time, Merwin stated.

Match reported its 4Q revenues short of expectations due to a shortfall in the non-Dating segment. Analyst Christopher Merwin believes that the company may find it difficult to achieve its targets for the Dating business, especially Tinder, which is still in the early stages of monetization.

The company reported higher-than-expected 4Q EBITDA of $99 million, aided by higher-than-expected stock-based comp.

Merwin expects the company to face some difficulty in achieving its 2016 guidance due to stiff competition, particularly in mobile. Management does not expect an acceleration in Tinder net adds.

“While we continue to believe in the long-term opportunity for Tinder, it will likely take time to optimize the user experience and build a direct ad sales force,” the analyst said.

The average net add 1Q estimate for Tinder has been reduced from 295K to 185K. The 2016 revenue and EBITDA margin estimates have been reduced from $145 million to $137 million and from 40 percent to 30 percent, respectively.