Will Tinder & PMC Growth Aid Match Group (MTCH) Q4 Earnings?

Match Group, Inc. MTCH is set to report fourth-quarter 2017 earnings results on Feb 6.

The company went public in November 2015, and in its first earnings announcement as a publicly-traded company, Match Group had missed earnings estimates by 5.3%.

The succeeding quarters proved to be disappointing as well, as the company’s earnings missed estimates thrice in the trailing four quarters, for a modest average negative surprise of 5.3%. Last quarter, it missed estimates by 13.6%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Match Group is the world’s foremost provider of dating products and operates a portfolio of more than 45 brands. Three of its biggest and best known brands are Match.com, OkCupid and Tinder. The company’s reputation, established user base and size will likely prove conducive to the upcoming earnings.

About 60% of the company’s revenues come directly from users of its dating services in North America, mostly in the form of membership subscriptions. Online dating has been expanding, as users from more demographics join the fray. Most of Match Group’s users connect from mobile devices, where conversion to paid members is also higher. Last quarter, its average PMC (paid-member count) rose 18% year over year, driven by solid contribution from Tinder, Match and OkCupid. This momentum bodes well for the company’s top-line growth in the quarter under review.

Match Group has been reaping profits for the past three years and recording top-line growth as well. The company is currently enjoying strong growth, driven by robust growth momentum at Tinder, solid performances from Meetic and Match, as well as PlentyOfFish.

Match Group, Inc. Price, Consensus and EPS Surprise

Match Group recently rolled out a Tinder Gold subscription package, which is anticipated to drive incremental ARPPU as well as incremental PMC. The company also launched the “Likes You” feature, along with a bunch of other optimizations recently. These factors should meaningfully drive the results of the quarter under review.

In the last quarterly report, Match Group had given its revenue projections for fourth-quarter 2017 in the range of $355-$365 million (reflecting 22% year-over-year growth at the mid-point), with an EBITDA of $147-$152 million for the quarter (reflecting 17% year-over-year growth at the mid-point).

However, weaker-than-expected ad revenue growth trends might dent the company’s top line in this quarter. Further, profits might be impacted due to higher investments in Tinder, in addition to higher-than-expected data costs and professional fees.

Earnings Whispers

Our proven model does not conclusively show that Match Group will likely beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Match Group has an Earnings ESP of -6.88%,as the Most Accurate estimate of 29 cents is pegged below the Zacks Consensus Estimate of 31 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank of 3, which increases the predictive power of the ESP. However, the company’s ESP of -6.88% makes surprise prediction difficult.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

GlaxoSmithKline PLC GSK, with an Earnings ESP of +10.35% and a Zacks Rank of 3, is expected to release quarterly numbers around Feb 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

NGL ENERGY PARTNERS LP NGL, with an Earnings ESP of +78.95% and a Zacks Rank of 3, is slated to report results around Feb 6.

General Motors Company GM has an Earnings ESP of +2.13% and a Zacks Rank #3. The company is likely to release earnings around Feb 6.

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