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Why Match Group Lost 12% in 2021

By Jeremy Bowman – Jan 6, 2022 at 12:45AM

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The online dating company put up strong growth, but expectations were even higher.

What happened

After a monster year in 2020 as the company benefited from the effects of the pandemic, shares of Match Group (MTCH 0.27%) pulled back last year, falling 12% according to data from S&P Global Market Intelligence.

As you can see from the chart below, the stock was volatile for most of the year but then dipped toward the end of 2021, tracking with a sell-off in other growth stocks.

^SPX Chart

^SPX data by YCharts

So what

Match Group, the leader in online dating, posted solid results through 2021, beating estimates in most of its earnings reports; its revenue rose 25% through the first three quarters of the year. The company also said it would acquire HyperConnect for $1.725 billion, a tech company that makes a video chat app and a social livestreaming platform.

A person using a dating app on a smartphone.

Image source: Getty Images.

In its February earnings report, revenue increased 19% to $651 million, which edged out estimates of $648 million. Profitability remained strong with an adjusted operating margin of 33%; however, the stock fell 8% on the news as it missed earnings-per-share (EPS) estimates by a penny.

Investors changed their tune in the second-quarter earnings report, with revenue rising 23% to $668 million, which easily beat estimates of $650 million. The company continued to experience broad-based growth with revenue from Tinder -- the source of a majority of the company's revenue -- up 18%, and non-Tinder revenue growing 30%. Profits also soared past the consensus pf $0.40 EPS with $0.57. The stock gained 3% on the news.

The stock pulled back in August as the company missed bottom-line estimates in the second quarter, posting $0.46 EPS against expectations of $0.51. In September, the stock rose on news that it would be added to the S&P 500, which gives stocks a boost as it forces index funds to add it.

The stock then jumped 10% in October to reach its high point for the year on news that Alphabet's Google would slash in-app subscription fees to 15%, but the company missed estimates in its third-quarter earnings report in November and offered weak guidance for the fourth quarter. The stock slumped to finish out the year, declining with other growth stocks.

Now what

Match stock is down 5% through the first three days of 2022, showing that the stock could still face pressure from rising interest rates. However, Match remains a good bet for long-term growth, given its leadership in online dating, which is continuing to gain an audience. While Match stock will likely continue to be volatile, long-term investors are better off focusing on the underlying business, which remains strong.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns Match Group. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), and Match Group. The Motley Fool has a disclosure policy.

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