When you’re looking for ideas to invest in, it’s important to check out the earnings history of the stock you’re investigating. Not only what the growth has been in earnings but how has the sentiment of analysts changed over time? Historically, do analysts have high hopes then dial back their expectations? Revising EPS estimates to the downside isn’t nearly as attractive as the opposite. If analysts have to keep dropping their expectations, eventually investors will be taking back their investment dollars.
Today’s Bear of the Day is Match Group (MTCH - Free Report) . Match Group, Inc. provides dating products. The company operates in two segments, Dating and Non-dating. It operates a portfolio of approximately 45 brands, including Match, Tinder, PlentyOfFish, Meetic, OkCupid, Pairs, Twoo, OurTime, BlackPeopleMeet, and LoveScout24. The company offers its dating products through its Websites and applications in 42 languages approximately in 190 countries.
Match Group is currently a Zacks Rank #5 (Strong Sell) because of several earnings estimate revisions to the downside. Over the last thirty days, five analysts have dropped their estimates for the current year while seven have done so for next year’s number. This is setting up Match Group for a 0.9% contraction in EPS this year. That in vacuum doesn’t seem like such a drastic number but when you look at the revision history then it paints a different story. A year ago, analysts were expecting 76 cents EPS this year, now they are looking for just 63 cents. Next year’s number started off at $1.17 last year and has dwindled down to 79 cents.
The stock has been hanging in there despite this bearish estimate behavior. After bottoming out at $15.72 in March of this year, Match rallied over $20 into the start of June. Another round of selling pushed it down under $17 before strength pushed it into a new consolidation range between $18 and $20. The 50-day and 200-day moving average are converging here, underlining the compression of the consolidation range.
The tighter a trading range becomes, the higher the likelihood of a breakout from that range. Often times, traders use Bollinger Bands to make this observation. Here you can see it develop as the two bands become further compressed.
Investors looking for other stock ideas within the same industry should check out Zacks Rank #1 (Strong Buy) Tencent Holding (TCEHY - Free Report) and The Trade Desk (TTD - Free Report) .
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