Shares of the Tinder parent company, Match Group Inc. (MTCH) are up after hedge fund Starboard Value took a massive stake in the company, over 6.5% to be exact.
The stock climbed 9% in extended trading yesterday and picked up where it left off this morning, resulting in a 14% gain on the week so far.
Starboard Value was founded more than 20 years ago by Jeffrey Smith and Mark Mitchell. Smith still serves as CEO today and is very keen on the Match Group.
However, he is urging the company to make drastic changes to save the company as its performance dwindles. If it’s unable to turn things around, he believes a sale is in order.
Smith believes the right play is to focus on improving Tinder’s margins, as this business makes up more than half of the total revenue for Match Group. He sees potential in cost reduction and product innovations.
But, he also thinks the Hinge business and other relatively new apps present their own unique opportunities for improvement as well. On top of all this, he called for more rigorous share buybacks.
Should Match Group fail to deliver on these strategic initiatives, Starboard implores the company to go private. Someone with the Match Group spoke to the news saying all focus remains on executing key initiatives – growing Tinder and Hinge while maximizing shareholder value.
The company had once reached a market cap of $40 billion – but 3 years later, that figure has plummeted to just $8.5 billion. Inflated costs and fewer active users are putting a strain on Match Group, which has seen its stock sink 28% in the past year.
Coming off the heels of an earnings miss in May, the turnaround this week was much needed for MTCH. We’ve taken a closer look through the VectorVest stock software and found 3 reasons you may want to follow Starboard’s lead and buy this stock.
MTCH Has Good Upside Potential, Fair Safety, and Very Good Timing
VectorVest simplifies your trading strategy by giving you everything you need to make calculated, emotionless decisions in 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each sits on a scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy. Better yet, the system issues a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for MTCH:
- Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This makes it a far superior indicator than the typical comparison of price to value alone. MTCH has a good RV rating of 1.22.
- Fair Safety: The RS rating is a risk indicator. It’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 0.85 is a ways below the average for MTCH, but deemed fair nonetheless.
- Very Good Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day week over week, quarter over quarter, and year over year. MTCH has a very good RT rating of 1.38, reflecting the rally it made over the past few weeks.
The overall VST rating of 1.18 is good for MTCH and enough to earn the stock a buy. But before you make your next move, take a moment to review this free stock analysis for even deeper insights to help you earn the highest returns possible on this trade. Set yourself up for success with VectorVest today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. MTCH has gained more than 14% over the past week after an active investment group took a 6.5% stake in the company and laid out a list of suggested initiatives. The stock itself has good upside potential, fair safety, and very good timing.
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