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Bull Of The Day: The Meet Group (MEET)

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Meet Group MEET is lining up as a buy with momentum from its latest earning. Upwardly adjusted EPS estimates have propelled these shares into a Zacks Rank #1 (Buy). MEET lost almost all of its value when the dotcom bubble burst in 2000, but the company has since restructured. The firm has acquired various global dating and interactive apps that have thrown this company back into profitable growth.

In this technological age, people are interacting increasingly through a digital filter. Meet Group is improving the way people interact and meet through an online medium. The company operates platforms that are meant to connect people in this digitalizing age. The apps include MeetMe, LOVOO, Skout, Tagged, and GROWLr.

The online dating application space is quite saturated, but The Meet Group is still able to bring unique value to the table. This company has leveraged live video streaming on its platforms, which has brought in more revenue per user quarterly. Video revenue grew 156% year-over-year in the first 3 reported quarters of 2019.

The Meet Group has grown its MAU’s to 18.7 million (10% year-over-year growth). The company’s ability to appreciate its monetization of each user is its most significant driver. Its average revenue per daily user grew 20% year-over-year in Q3, and this metric for video users grew 93%.

These quickly saturating tech spaces need to consolidate as market share and economies of scale become essential to compete. Meet has made 4 critical acquisitions in the past 3 years, which have substantially grown the attractiveness of this investment.

Meet has had growing reliable free-cash-flows and a sizable cash pile of $27 million that gives this firm a fair amount of financial flexibility for continued investment in core competencies.

This stock is being valued at a forward P/E of 8.5x, which is less than half of what the broader market’s 18.9x and a fraction of its biggest competitor, Match Group (MTCH), is being valued at. The appealing valuation makes MEET attractive to both retail investors as well as potential acquirers.

Meet has recently been approached by German investment group NuCom an arm of ProSibenSat.1 Media, Germany’s largest TV Network. Analysts are projecting that these shares would sell for at least $7 in an acquisition scenario, which would represent a >32% upside of the shares are trading at today. At MEETs current valuation, the firm looks ripe for a buyout, whether it’s NuCom or another acquirer.

MEET has seen a lot of volatility over the past 52-weeks, coming down over 40% then back up to flat.

Take Away

MEET is seemingly trading at a discount, and its small-cap characteristics combined with low coverage creates a savory mix for a value opportunity. This tech company is still expected to grow its topline by double-digit percentages for the next couple years and its EPS growth and margins look even better. 4 out of 5 sell-side analysts covering this stock are calling these shares a buy right now.

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