Match Group Inc. (NASDAQ: MTCH), a dating app giant, surged by nearly 10% on the news that Starboard Value had acquired a 6.6% stake.
Starboard’s aggressive shareholder activism has sparked speculation about the future of Match Group, especially around the possibility that a strategic sale could be made if turnaround efforts fail.
Analysts at Wolfe Research believe that the stock of Match Group may be already on a path towards a turnaround.
Starboard wants Match Group stock back
In a letter sent to the board of Match Group on Monday, Jeffrey Smith from Starboard Value encouraged them to cut costs in order to improve their margins.
The activist investor urged Tinder to aggressively buy back stock in the short term to boost shareholder values. In the letter, he blamed Tinder’s underperformance on a lack innovation and outlined initiatives to boost growth and profitability.
Smith says that if all else fails the management should examine whether the “best way forward for Match Group” would be to become a private company.
He criticized MTCH for failing to capitalize on its “enviable” position in the expanding market of online dating in order to compete with Bumble, and offset a decline in discretionary spending in an uncertain economic climate.
A company representative stated that Match Group “looks to continue our open dialogue with our investors, including Starboard.”
The spokesperson confirmed that management is committed to expanding Hinge, and growing Tinder.
Match Group stock was also a target for other investment firms this year, including Elliott and Anson Funds.
Wolfe analysts recommend Match Group stock
Wolfe Research analysts, on the other hand, do not necessarily agree with Starboard Value.
They began covering Match Group this morning, with an “outperform rating”. Their $36 price goal signals a 12% increase over its previous close.
The investment firm believes Tinder has reached a tipping point, and that the decline in paid users on the platform is likely to reverse in the next few months. In a research note published on Tuesday, its analysts praised the product and marketing efforts made by the management.
Wolfe Research believes that Match Group shares are attractive at a price of about 13 times its estimated earnings per share for 2025.
MTCH’s first financial quarter was ahead of Street expectations in May. The dating app operator will report its Q2 results at the end of this week. The consensus is that it will earn 48 cents per share, roughly the same as a year ago.
This post Starboard’s 6.6% share sends Match Group stocks up 10%: Strategic Moves expected? This post may be updated as new information unfolds
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