The rise of online dating has been undeniable over the past decade. Applications like Tinder, Bumble, and Hinge have become massively popular around the globe and are now the main way young people find potential romantic partners. Industry analysts expect this trend to continue, and are projecting a 5.5% compound annual growth rate (CAGR) from 2022 through 2030 for online dating spending.

But if the industry is so ripe for growth, why is the leading online dating company -- Match Group (MTCH 2.61%) -- down 58% this year? It all comes down to poor execution, executive turnover, and macroeconomic headwinds. Investors have soured on the company in the short term, but for long-term believers of the online dating market, this price drop could provide a buying opportunity.

With the stock trading cheaply, is now the time to buy Match Group? 

Why is the stock down?

Match Group's troubles have come from multiple areas. Some issues are self-imposed, others are due to general economic developments.

First, Match Group is getting hit hard with foreign exchange headwinds. Since the company operates globally but earns its revenue in U.S. dollars, when the value of the dollar increases compared with foreign currencies (as it is doing right now) the company's revenue growth is negatively impacted. Last quarter, Match Group's revenue would have grown by 19% without these headwinds, but only ended up growing 12% year over year. In the third quarter, management is expecting foreign exchange to have an 8-point impact on revenue growth and for overall revenue to be flat year over year.

This revenue growth slowdown and guidance came as a bit of a shock, as management was expecting 15% to 20% revenue growth in 2022 at the beginning of the year. As mentioned above, some of this was due to foreign exchange dynamics that Match Group can't control. But the rest has come from disappointing execution at Tinder, Match Group's most important app. According to the second-quarter shareholder letter, failed execution of new product initiatives is going to lead to disappointing revenue growth in the second half of 2022, which will bring down Match Group's consolidated numbers. 

Compounding investor fears, Match Group has had major managerial turnover. It just hired former Zynga President Bernard Kim to be CEO, and he subsequently let go of the person running Tinder, who had only taken the job a year ago. Executive turnover is never a good sign, which likely has investors worried even further about Match Group's prospects in the coming quarters and years.

How new management plans to fix things

Kim outlined how he plans to get Match Group back on track and ride the growth of the online dating market. First, he is directly overseeing a new leadership team at Tinder while searching for a new CEO to lead the division. These include some all-star performers across the Match Group portfolio as well as people Kim has trusted from his time working in the gaming industry. Kim said the team's near-term priorities are to launch a product focused on female users and a shorter-term subscription package. Both will hopefully improve the product for users and help drive more revenue growth.

Second, Kim plans to accelerate the international rollout of Hinge, Match Group's second-biggest and fastest-growing application. At the start of this year, the app was only available in English-speaking markets, and the company had plans to slowly roll it out to one new country each quarter. Kim is doubling this pace, telling the Hinge team to hit two new regions every three months. First, it will target Europe and India, then in the following quarters it will move throughout the rest of Asia. The app is on pace to generate $300 million in revenue for Match Group this year. If the international rollout is successful, Hinge could drive more than $1 billion in total revenue for the company. This would be quite meaningful compared to the $3.2 billion in consolidated sales it has generated in the last 12 months.

Keep things in perspective

The narrative on Match Group is bad right now, and if you invested at higher prices you are likely not very happy with the stock's performance. But investors should keep things in perspective. In a potentially recessionary period, with energy shocks hurting consumer spending around the world, plus poor product execution and foreign exchange headwinds, Match Group is expecting revenue to be flat year over year. I think you could spin this as bullish for the resiliency and secular growth of the online dating market. 

If or when some of these headwinds abate (especially the lack of product execution), Kim says to expect Match Group to get back to double-digit revenue growth. In 2021, the company generated around $1 billion in adjusted operating income. With a market cap of just $15 billion, this gives the stock a trailing price-to-earnings (P/E) ratio of just 15. Now, 2022 might see a downtick in profits, but if revenue growth can accelerate and margins can come back to 2021 levels over the next few years, this P/E could go even lower. In my book, that makes the stock a buy right now