Match Group Inc. (MTCH, Financial) topped analysts’ expectations on third-quarter GAAP earnings and revenue after the closing bell on Tuesday. The Dallas, Texas-based online dating website posted a GAAP earnings per share of 51 cents, up 16% year over year, on $541.49 million in revenue. The top line grew 22% from the same quarter of 2018.
Analysts expected Match would have posted lower GAAP earnings per share of 42 cents and revenue of $540.73 million. Nevertheless, despite surpassing analyst expectations, shares of Match Group fell sharply by $10.58 (or 15.38%) to a price of $58.19 in after-hours trading.
The company reported the following year over year changes in key financial and operating metrics: the average number of subscribers was 9.6 million (19% growth) and the average number of Tinder subscribers was 5.7 million subscribers (39% growth).
Tinder is one of the many dating apps that the company has in its portfolio. The others inclue Match, OkCupid, Meetic, OurTime, PlentyOfFish, Hinge, Pairs and many more.
The Average Revenue per Subscriber was $0.59, up 4%, and the Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization Margin rate was 38% of revenue, up 100 basis points. The operating income was $176.6 million, up 26% and the year to date, and free cash flow was $442.8 million, up 10%. The increase in the free cash flow was the result of higher third-quarter net earnings and an intense usage of cash in the second quarter of 2019.
As of Sept. 30, 2019, the balance sheet had $866 million in total liquidity, including a $500 million undrawn revolving credit facility. Thus, cash on hand and equivalents was $366 million. The long-term debt amounted to $1.6 billion and total equity was worth $227.56 million.
During the quarter, in order to mitigate the dilutive impact on outstanding shares resulting from the enactment of the stock-based compensation plan, the company bought back 1.4 million shares of its own common stock at an average price of $75.91 per share, spending $106 million in total.
Additionally, a special committee of Match Group is evaluating a preliminary proposal of its controlling shareholder InterActiveCorp (IAC, Financial) to separate the company from InterActiveCorp, which has an economic ownership interest of 80.8% and a voting interest of 97.5%. The proposal was received on Oct. 10 earlier this year.
The below chart shows that the share price of Match has risen 61% so far this year to reach $68.77 at close on Tuesday for a market capitalization of about $19.3 billion. The stock price has outperformed the Nasdaq by over 35% over the same period. The share price as of Tuesday is below the 120-, 70- and 30-day simple moving average lines.
The 14-day relative strength index of 35 suggests the stock is not far from oversold levels.
Wall Street issued an overweight recommendation rating and has established an average target price of $94.47, implying a 37.4% upside from Tuesday’s closing price.
Disclosure: I have no positions in any securities mentioned.
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