Why JPMorgan Is Falling For Match Group, Despite Stock's Recent Weakness

Match Group Inc MTCH, the online dating space, offers investors a secular growth story and shares should be bought by investors after the stock's weakness in 2019, according to J.P. Morgan.

The Match Group Analyst: Cory Carpenter upgraded Match Group's stock rating from Neutral to Overweight with a price target lifted from $130 to $175.

The Match Group Thesis: Match Group's fourth-quarter report shows the online dating company continues to feel the impact from the ongoing COVID-19 pandemic, Carpenter wrote in the upgrade note.

However, the company is well-positioned as a reopening play and the stock's 9% decline since the start of 2021 offers investors a good entry point, the analyst said. 

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Investors are likely to better appreciate Match Group's portfolio of brands as the company's story is much more than its Tinder property, he said.

In fact, Match operates numerous brands experiencing growth, including Hinge, which Carpenter said has increased its monthly active user base sevenfold to 4 million since 2018.

Match Group's management guided its revenue and EBITDA growth to be in the mid-to-high-teens in 2021, but the math behind this outlook implies the guide is conservative, the analyst said. 

Management guided first quarter revenue to be up 20% at the high-end, and JPMorgan is modeling second-quarter growth of 22%.

This implies Match Group needs to grow third- and fourth-quarter revenue by just 15%, and this "seems low to us," he said. 

"We recognize valuation still isn't cheap, but we're willing to look beyond that for now given the significant multi-year growth opportunity ahead and what we expect to be a strong recovery in Match's biz as the global economy re-opens in '21," Carpenter wrote.

MTCH Price Action: Shares of Match Group gained 9.06% Thursday, closing at $150.63. 

Photo by Kristina Litvjak on Unsplash.