Why Match Group shares rose 14.2% in September

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What happened

Shares of the online dating conglomerate Match group (NASDAQ: MTCH) rose 14.2% in September, according to data from S&P Global Market Intelligence. The company, which owns some of the world’s most popular dating apps, could see a huge cut in spending after the latest court rulings on Apple‘sand Googlemobile application stores.

So what

Match Group has popular dating apps like Tinder, Hinge, and OK Cupid. The company makes money by charging users for enhanced features or subscription products for these dating marketplaces. Since these payments are almost all made through a mobile device, Match Group has had to pay up to 30% of its earnings to Apple and Google, which force developers to use its payment system and prevent them from sending users. outside of the App Store. to pay. However, that could change after a California judge ruled that Apple was not legally allowed to prevent a company like Match Group from avoiding its payment toll.

Image source: Getty Images.

How would that help Match Group? Quite simply, by improving its profit margin. Previously, around 30% of all its revenue went to App Store owners. If Match Group is successful in convincing users to evade App Store tolls, these expenses could decrease significantly, which would help improve Match Group’s profit margin. With such a big change in profit margin, this news is likely the reason Match Group stocks did so well in September.

What’s impressive is how strong Match Group’s profit margin still was with the high tolls of the App Store. The company’s operating margin is consistently north of 30%, which means that without the App Store fees, the company could have a profit margin of over 60%, which would be one of the best in the world. It’s unlikely the business can escape all of these fees, but it illustrates the incredible unitary economy of dating apps.

Now what

After the September hike and a recent sell-off in October, Match Group is trading at a market cap of around $ 42 billion. With just $ 2.66 billion in revenue over the past 12 months and $ 3 billion forecast for all of 2021, some investors might think Match Group shares are expensive right now. But with a fast-growing company (27% revenue growth in the last quarter) and the potential for significant margin increases over the next several years, there’s a lot to love about this stock right now, even at a market capitalization north of $ 40 billion. .

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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Brett Schafer owns shares in Match Group. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Apple and Match Group. The Motley Fool recommends the following options: March 2023 long calls at $ 120 on Apple and March 2023 short calls at $ 130 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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