Shares of dating service app Match Group (MTCH -0.31%) fell 15% in January, according to data from S&P Global Market Intelligence. There was an initial price jump after the stock got an upgrade, and performance over the past few quarters has been excellent. The drop had more to do with the general macroeconomic environment that has been lowering prices for stocks with supersized valuations.
Match Group owns a large portfolio of dating and social meeting apps, including the eponymous Match.com and popular Tinder sites. The company says that 60% of all online dating relationships began on one of Match Group's sites.
Growth has been spectacular, with revenue increasing at a 22% compound annual growth rate from 2016 through 2021. The company has made many acquisitions over the past few years to solidify its dominance and expand its operations, moving from the dating-only sector into more social meeting apps. Despite these acquisitions, which are moving the needle on top-line growth, it remains profitable with strong margins. In 2021, revenue increased 25% year over year to nearly $3 billion, and operating income increased 14% to $850 million. However, fourth-quarter revenue of $806 million missed analysts' expectations of $818 million, and a fourth-quarter loss per share of $0.60 missed earnings-per-share expectations of $0.59.
The portfolio as a whole was strong in 2021, but new acquisitions have been particularly robust, and these are an exciting and integral element of future growth. These emerging brands were led by Hinge, the "app designed to be deleted," targeting a young demographic looking for long-term relationships. However, acquisitions also affect profitability, and Match Group posted a net loss in the fourth quarter partially because of its purchase of Hyperconnect, an Asian social connection platform.
After recovering from the early 2020 market crash, its stock soared, climbing about 90% for the year. But it fell in 2021, losing about 13% of its value, along with many other tech stocks that skyrocketed the year before.
Match Group is facing headwinds from the pandemic, since many people are still practicing some form of social distancing. The stock is still quite expensive, trading at 11 times sales, and management is guiding for revenue to increase 15% to 20% year over year in 2022. Match has a great long-term outlook with a return to profitability, but investors may find the valuation steep, with the current guidance at the current price.