MTCH - Starboard's 6.6% stake sends Match Group stock up 10%: Strategic moves expected?
2024-07-16 14:53:11 ET
Match Group Inc (NASDAQ: MTCH) surged nearly 10% on Tuesday following the news of Starboard Value acquiring a 6.6% stake in the dating app giant.
The move by Starboard, known for its aggressive shareholder activism, has ignited speculation about Match Group’s future, particularly around the possibility of a strategic sale if turnaround efforts falter.
However, according to analysts at Wolfe Research, Match Group stock may already be on a path to a turnaround.
Starboard wants Match Group to buy back stock
Jeffrey Smith of Starboard Value urged Match Group to focus on cutting costs to improve margins in a letter to its board on Monday.
The activist investor urged the internet company to aggressively repurchase stock in the near term to boost shareholder value. He blamed a lack of innovation at Tinder for the underperformance and laid out initiatives aimed at boosting growth and profitability in the said letter.
But if all else fails, the management must examine if the “best path forward for Match Group would be as a private company,” according to Smith .
He blasted MTCH for not capitalizing on its “enviable position in the expanding online dating market” to beat competition from the likes of Bumble and offset a slowdown in discretionary spending amidst an uncertain economic environment.
Match Group “looks forward to continuing our open dialogue with all of our investors, including Starboard,” as per a company representative.
The spokesperson also confirmed that the management remains committed to expanding Hinge and growing Tinder.
Note that Match Group stock has been a target of other investment firms as well this year including Elliott and Anson Funds.
Wolfe analysts recommend buying Match Group stock
Meanwhile, analysts at Wolfe Research do not particularly agree with Starboard Value.
They assumed coverage of Match Group stock this morning with an “outperform” rating. Their $36 price target signals 12% upside on its previous close.
The investment firm is convinced that Tinder has reached a turning point and the ongoing decline in paid subscribers on the platform will likely reverse in the coming months. Its analysts lauded product and marketing efforts of the management in their research note on Tuesday.
Wolfe Research finds Match Group shares attractive at about 13 times the company’s estimated EPS for 2025.
In May, MTCH came in ahead of Street estimates for its first financial quarter. The dating app operator is scheduled to report its Q2 results by the end of this month. Consensus is for it to earn 48 cents a share – roughly unchanged versus a year ago.
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