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Why Is Wall Street Giving Dating Apps The Cold Shoulder?

tinder

There’s a lot of money to be made in finding love—fleeting or otherwise--for America’s lonely hearts, but the jury is out as to whether Tinder is ‘the one’.

While Tinder now boasts 4.2 million paying users and is expecting $800 million in revenue this year—way above Facebook Dating, for instance—there’s another view, as well: On Wednesday, stocks in its corporate owner, Match Group Inc. (NASDAQ:MTCH) plunged 20 percent on a weak subscriber growth forecast.

Love might be in the air, but the question is whether it will be a one-night hook-up or a long-term relationship.

(Click to enlarge)

Match owns a handful of dating services, including Tinder, Hinge, OkCupid and PlentyOfFish—largely dominating the hook-up ‘industry’. But while the company reported Q3 revenue of $444 million—a 29-percent jump year-over-year—and exceeded analyst expectations, Wall Street wasn’t convinced.

For Q4, Match said it expected $440-$450 million in revenue, and analysts were expecting $454.5 million.

(Click to enlarge)

Source: Match

So, even though Match stock was up some 60 percent year-to-date prior to Wednesday’s plunge, it’s about to get stood up by Wall Street. 

At the heart of the matter is Tinder. Match said Wednesday that Tinder’s quarterly new paying subscribers is expected to fall below the 200,000-250,000 range. Related: Markets Rally Following Mid-Term Elections

For Q3, Tinder added 344,000 paying subscribers, but the problem is that users aren’t renewing subscriptions to the premium service, Tinder Gold, and there has been a “big hail of terminations”, as conceded by CFO Gary Swidler.

But while Wall Street may be giving Match the cold shoulder over its quarterly reporting, not everyone’s a hook-up skeptic.

"While a slightly underwhelming 4Q guide is a negative, we note that the majority of the softness is external rather than fundamental," Jefferies analyst Brent Thill said in a Tuesday note to clients, as reported by Business Insider, adding that those external factors included a foreign exchange headwind, advertising fallout from the EU’s General Data Protection Regulation and lawsuit expenses. With external rather than fundamental ‘softness’ in mind, Thill has a “buy” rating on Match, and a price target of $70, which represents a 63-percent upside from Wednesday share price. 

But Match has a future regardless, if a recent nationwide survey by health insurer Cigna is anything to go by. According to the survey, nearly 50 percent of American respondents feel alone or left out always or sometimes. And 2 in 5 felt like "they lack companionship," that their "relationships aren't meaningful" and that they "are isolated from others."

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Tinder Gold isn’t offering enough to keep subscribers interested. Essentially, the premium service lets users view who “liked” their profiles without sorting through all the match potentials to find them.

Swidler insists it is just a “one-time effect from a surge of a year ago”, and there’s “nothing more to read into it than that”. Related: Bitcoin Volatility Falls To Two-Year Low

At the same time, as BTIG analyst Brandon Ross told The New York Post, “we’re also seeing Tinder have to spend a lot more marketing dollars, which aren’t necessarily able to keep up the same subscriber trajectory”.

There may be something to suggest that newbies in the online dating world have a big surge and then fail to astonish later on. Take Hinge, for instance, which Match acquired in June. According to the corporate parent, Hinge has seen a 5x increase in downloads since.

(Click to enlarge)

By Michael Scott for Safehaven.com

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