Match stock gets 2nd downgrade this week

Investing.com -- Jefferies analysts cut their rating on Tinder owner Match Group (NASDAQ:MTCH ) from Buy to Hold, chiefly due to the ongoing headwinds with Tinder’s monthly active users (MAUs). This is the second downgrade the stock has faced this week after New Street Research reduced its rating to Neutral.

The company’s shares fell 2% on Tuesday.

The online dating app has experienced a significant drop in MAUs, with a loss of 3 million since the first quarter of 2024. Moreover, the introduction of new verification requirements could further hinder MAU growth, according to Jefferies.

The investment bank also trimmed its price target on Match Group shares from $40 to $32.

The firm’s analysts point out that Tinder is seeing a shift in consumer behavior, with users moving away from the traditional "swipe" model towards "prompt" based dating platforms. This change in preferences is contributing to a decline in Tinder's ecosystem, despite its large user base, which is four times the size of Hinge's MAUs and six times its paying users.

Hinge, though growing, remains too small to offset the losses from Tinder, leaving Match Group with a projected revenue compound annual growth rate (CAGR) of approximately 4%.

Tinder's MAUs have decreased from 50 million in the first quarter to 47 million, and there is skepticism about the app's ability to improve these figures.

Also, new features aimed at enhancing the ecosystem and removing "bad actors" may face resistance from existing users who are reluctant to comply with verification processes.

Management's current guidance anticipates improved MAU trends in the second half of 2025 and acceleration into 2026 and 2027.

Despite high brand recognition, particularly among the 18-24 age cohort, Tinder's recent lack of innovation has disappointed both investors and consumers.

“Tinder has finally announced new features including stronger verification, AI-based dating features, and even a new "double-dating" feature,” Jefferies analysts said in a note. “However, we are curious if the brand is beyond repair and if these features could be better off being used on Hinge.”

Hinge remains a bright spot for Match Group, with a projected 20% three-year CAGR and potential margin improvement to over 35%.

The company has also committed to returning 100% of its free cash flow to shareholders, but analysts remain skeptical that these positive aspects can significantly boost the stock in the medium term, given the persistent issues with Tinder's user engagement.

Prior to Jefferies, New Street Research downgraded Match Group shares to Neutral from Buy, noting a “lack of visibility into how Tinder monetization improvement is expected to unfold.”

Source: Investing.com