Match Group, Inc.’s (MTCH - Free Report) shares have gained nearly 3% in yesterday’s trading session, outperforming the market.
In the past one year, the company’s shares have soared 147.5%, outperforming the industry’s growth of 6.9%.
Will the recent positive trend continue driving the stock over the long haul or is it due for a pullback? Before we discuss how investors and analysts have reacted of late, let's take a quick look at the recent fundamentals and trends in order to get a better hold on the catalysts.
Stellar Q1 Results
Match Group delivered first-quarter fiscal 2018 adjusted earnings of 26 cents per share, which surpassed the Zacks Consensus Estimate of 23 cents per share. Moreover, the figure increased from the year-ago earnings of 12 cents per share.
Revenues of $407.4 million increased 36% year over year and beat the Zacks Consensus Estimate of $383 million. The increased marked the highest revenue growth quarter-over-quarter since the IPO.
Tinder is the primary catalyst behind the company’s year-over-year revenue growth. Revenues from Tinder grew more than 150% year over year during the quarter.
Match Group anticipates fiscal second-quarter 2018 revenues to be in the range of $405-$415 million. The Zacks Consensus Estimate is pegged at $412.5 million.
For fiscal 2018, Match Group raised guidance. The company now expects revenues in the range of $1.6-$1.7 billion (up by $100 million). The positive outlook was driven by Tinder, better-than-expected Gold and renewal rates, and a la carte strength.
Adjusted EBITDA is now anticipated to be in the range of $600-$650 million, up by $50 million due to revenue strength, Tinder operating leverage and well-organized marketing spending.
Other Growth Drivers
The company is considered to have pioneered the concept of online dating, which is why it enjoys a first mover’s advantage in this market. Match Group has been benefiting from increasing subscriber addition in the form of membership subscriptions. Its average paid subscribers surged 26% to 7.4 million in the first quarter, driven primarily by strength in both North America (up 17% year over year) and international (up 37% year over year). During the quarter, Tinder average subscribers increased 87% year over year and came in at 3.5 million. Average subscribers grew 368,000 sequentially and 1.6 million year over year. This momentum bodes well for top-line growth, going forward.
Upward Estimate Revisions
In the last 60 days, the Zacks Consensus Estimate for Match Group's second quarter and current year witnessed upward revisions. For the second quarter, the Zacks Consensus Estimate is pegged at 36 cents per share, up from earnings of 30 centsper share earlier. Similarly, the Zacks Consensus Estimate for current year is pegged at $1.34 per share compared with $1.24 projected 60 days ago.
The stock has a Zacks Rank #3 (Hold). Additionally, the stock has long-term earnings per share growth rate of 12.5%.
In our opinion, the stock deserves a place in investor’s portfolio and we are expecting an impressive return from the stock in the next few months.
Some better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Texas Instruments Incorporated (TXN - Free Report) and Micron Technology Inc. (MU - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The projected earnings growth rate (3-5 years) for NVIDIA, Texas Instruments and Micron are 10.3%, 9.6% and 10%, respectively.
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