Looking for love

03/13/19
  • Match Group (MTCH) pulled back 8% since its February 7 earnings release
  • Stock is still up roughly 27% on the year
  • Company owns the most widely used dating and relationship apps

It was a little less than a year ago that digital dating company Match Group (MTCH) lost 22% in a single day when Facebook (FB) announced it was planning to launch a dating app. MTCH investors, swipe left!

That reaction proved overblown to say the least, and turned out to be a great buying opportunity for traders who were willing to step into the breach. The stock, which dropped from $47.12 to $36.71 on May 1, fell to $34.58 one day later, but by September it had rallied 76% to an all-time high around $61, a level it tagged intraday on February 7 after its Q4 earnings release:

Chart 1: Match Group (MTCH), 3/2/18–3/12/19. Blurb: Pullback from highs

Source: Power E*TRADE


In addition to beating its headline earnings and revenue numbers that day,1 MTCH also had the tailwinds of a broad market rally in its favor, so some investors may be scratching their heads a bit about the stock’s roughly 8% pullback from February 11 through March 8. As of yesterday, though, MTCH was still up around 27% on the year, vs. 11.5% for the S&P 500 (SPX).

Was there something other than the numbers themselves that seemed to cool the stock? Match, which in addition to its namesake app also owns leading dating platforms such as OKCupid and Tinder, recently wrapped up its acquisition of Hinge (a warmer, fuzzier relationship app sometimes billed as the “anti-Tinder”)1, one of the two dozen or so purchases it’s made over the past 10 years on its way to, simply, dominating the digital dating space.

Given Tinder’s apparent success, though, one may wonder why a company would be interested in its “anti” incarnation. Match’s February 7 earnings revealed Tinder added more than a million subscribers last year and generated more than $800 million in revenue, roughly half the company’s total.2 But the takeaway may be that no matter how great that one relationship is, MTCH has no plans to make it exclusive.

Match Group (MTCH), 12/26/18–3/12/19. Blurb: Turned higher this week

Source: Power E*TRADE


Perhaps the reality is that while investors (especially those who bought near highs) may be disappointed by a month-long pullback in a seemingly hot stock, experienced traders know markets never go up indefinitely, and they don’t go straight up. At its early February high, MTCH’s year-to-date return was roughly four times that of the SPX. So, it’s entirely possible the stock had gotten a little winded after a 24-day, 42% sprint that brought it, conspicuously, right to the implied resistance of its all-time high (chart above).

Which is all to say some traders may be looking at MTCH’s recent downturn with an eye toward a possible return to bullish form. More aggressive traders may see the stock’s ability to hold above last Friday’s low as evidence the pullback has run its course. Others may anticipate the stock still has more to give back before it will re-challenge its highs.

It’s impossible to know when a pullback will end or if it will turn out to be the beginning of a larger down move, which is why it’s essential to cap risk on every trade. In the case of MTCH, traders may be willing to risk a little heartache in return for some potential upside love.

Market Mover Update: Tech has followed up on last week’s relative strength by leading the market to the upside this week—as of yesterday the Nasdaq 100 (NDX) trailed the year-to-date leading Russell 2000 (RUT) by a little more than a percentage point.

Today’s numbers: Producer Price Index (PPI) and Durable Goods Orders (8:30 a.m.), Atlanta Fed Business Inflation Expectations (10 a.m.), Construction Spending (10 a.m.), E-Commerce Retail Sales (10 a.m.), EIA Petroleum Status Report (10:30 a.m.).

Today’s earnings include: Cloudera (CLDR), Domo (DOMO), Tailored Brands (TLRD), Williams-Sonoma (WSM).

 

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1 Vox.com. Nearly all of the big dating apps are now owned by the same company. 2/11/19.

2 TheVerge. Tinder added more than 1 million subscribers last year. 2/6/19.

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