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Why Match Group Stock Gained 12% in the First Half of the Year

By Jeremy Bowman – Jul 3, 2020 at 3:27PM

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The online dating leader rose as it delivered solid results in the face of the global crisis.

What happened

Investors were falling in love with Match Group (MTCH) all over again in the first six months of the year as shares of the Tinder parent racked up a 12% gain, according to data from S&P Global Market Intelligence, even as the COVID-19 pandemic roiled the market.

Though shares fell for most of the first three months of the year, the stock recovered briskly after the market crash as it proved to be resilient to the pandemic. 

An online dater touching an image on a smartphone

Image source: Getty Images.

So what

Match Group got off to a rough start in 2020. At the end of January, CEO Mandy Ginsberg said she would step down over health concerns and other personal issues. The following week, the stock sunk again as its fourth-quarter earnings report missed the mark. The company said revenue rose 20% to $547.2 million, missing estimates at $552.9 million, and earnings per share increased 15% to $0.45, which also missed estimates.

Guidance, meanwhile, was also below expectations as the company noted a software upgrade from Apple that made it easier to cancel subscriptions.

The stock fell further in February and March during the broader market crash, but then bounced back aggressively after the market bottom on March 23 as the CARES Act was passed. At the end of March, management gave a warning, saying that revenue would come in at the low end of its guidance range for the first quarter and that second-quarter revenue might fall sequentially as the pandemic led to new subscribers declining in a number of markets.

After gaining through April on the broader market recovery, the stock briefly popped in early May as it beat expectations in its first-quarter earnings report. It closed out the first half of the year rising to all-time highs as it prepared for its spinoff from its then-parent IAC at the end of June, and as investors increasingly saw it as resistant to the crisis.

Now what

In its second-quarter guidance, management said it expected revenue to grow year over year but decline sequentially, showing it is weathering the crisis well, though it's still affected. The competitive advantages it has as the clear leader in online dating have made it a pandemic-era winner, but the valuation may be getting stretched since it's still experiencing financial headwinds with subscriptions.

Jeremy Bowman owns shares of Match Group. The Motley Fool owns shares of and recommends Apple and Match Group. The Motley Fool has a disclosure policy.

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