Match Group (MTCH +7%) surged to its highest level in three months after Starboard Value revealed a 6.6% active stake and urged the Board to explore alternative value creation strategies. Starboard, a hedge fund specializing in undervalued companies, aims to unlock untapped opportunities.
With Starboard's involvement, the key question is whether MTCH can leverage enough opportunities to reverse its current trajectory and potentially return to pandemic-era growth levels.
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MTCH's recent Q1 report highlighted challenges in the online dating app sector:
- Payers declined by 6% year-over-year to 14.9 million, with Tinder experiencing a 9% drop to just under 10 million.
- The discretionary spending environment remains weak, affecting MTCH's transition to a paywall model, which has hindered recent growth trends.
- Rival Bumble (BMBL, Financial) also faced difficulties, reporting a 6% drop in average revenue per paying user (ARPPU) for its primary app. However, BMBL did see positive paid user growth year-over-year in Q1, suggesting potential market share gains.
- MTCH management remains optimistic, focusing on enhancing current features and introducing new, affordable offerings. They expect these efforts to boost a la carte revenue (ALC revs) in the latter half of FY24.
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While Tinder's performance has lagged, MTCH's Hinge app has shown strong growth:
- Payers increased by 31% year-over-year in Q1 to 1.4 million, with revenue per payer up by 14%.
- Hinge has grown 20% globally in Q1 and remains a core part of MTCH's long-term strategy, aiming to become a $1.0 billion revenue business, more than doubling its FY23 performance.
Starboard's active stake signals confidence in MTCH's brand recognition in the U.S. and Western Europe. However, past quarterly results have been disappointing compared to competitors. While today's surge may indicate the start of a rally, it might be prudent to monitor MTCH's performance over the next two to three quarters to see if the macroeconomic environment improves and the company can reverse its decline in paying users.
