Tinder Transformed Online Dating, But High Expectations Are Priced In, Says Wells Fargo

Match Group Inc MTCH’s Tinder is "the first truly global breakout mobile dating application," but high expectations are reflected in the parent company's valuation, according to a new sell-side take.

The Analyst

Wells Fargo's Peter Stabler downgraded Match Group from Outperform to Market-Perform and raised the price target from $42 to $45.

The Thesis

While competition remains abundant — as Tinder's success has spawned a "small village" of copycas — many Tinder competitors have failed to reach escape velocity, particularly at the global level, Stabler said in a Friday note.

Aside from Bumble, Tinder’s competition has largely failed to threaten its ubiquity in the mobile online dating space, the analyst said.

Tinder has jumped into the top download ranks in over 100 countries and has seen a notable boost to monetization trends, the analyst said.

While Tinder and Match’s other dating assets appear stable, Wells Fargo projects that further share price appreciation will need to rely on positive revisions rather than multiple expansion.

The recent surge in Tinder net subscriber adds will likely dissipate as the stock effect takes hold, and with Tinder Gold waning as a key driver, Stabler said bulls are leaning on the promised Tinder product refresh in the second half of 2018 as the next driver of positive forward revisions.

“While we agree that Tinder product execution has been very strong, we don’t believe past performance can guarantee similar success,” Stabler said.