IN THIS EPISODE, YOU’LL LEARN:

• Why investors are so weary of the online dating industry
• The biggest structural challenges weighing on Match Group’s growth
• About Match’s origin story as a spinoff and its executive turnover
• Why the senior dating market may be a growth engine for Match Group
• How Match Group operates and competes as part of a duopoly with Bumble
• What advantages Match Group has in its favor as the world’s largest online-dating company
• How to think about modeling MTCH’s intrinsic value
• Whether Shawn and Daniel add MTCH to their Intrinsic Value Portfolio
• And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Shawn O’Malley: We all have our own impressions of online dating, but at the end of the day, this is a company that nearly has a monopoly, with the exception of Bumble. Almost every dating app of consequence belongs to Match Group.

[00:00:12] Daniel Mahncke: And accordingly, they generating 23% free cash flow margins, 20% returns on capital, and yet it only trades at a forward P of less than 10. There’s a big chasm between the substantial profits they generate and what the market is willing to pay for them.

[00:00:28] Shawn O’Malley: Right? Three years ago, this is a company the market valued at more than 150 times earnings. So for as overly optimistic as investors were then, now they are perhaps equally pessimistic, if not more so.

[00:00:45] Intro: You are listening to The Intrinsic Value Podcast by The Investor’s Podcast Network. Since 2014 with over 180 million downloads, we’ve learned directly from the world’s best investors. Now we are applying those lessons to analyze businesses and investment opportunities every week, helping you uncover intrinsic value. And now here are your hosts, Shawn O’Malley and Daniel Mahncke.

[00:01:17] Daniel Mahncke: Well, folks, today we have an interesting one for you. I feel like we say that every single week, but that’s just because we, of course, do not choose boring companies, right, Shawn? It’s also quite a controversial pick. Shawn’s got a pitch for a stock that is as much of a battleground as any I’ve seen. And back in 2021, there were nearly $3 billion worth of shares being held short, and that number has come down a lot, but still, roughly 5% of the company’s shares are being sold short, meaning that people are basically making bets against the stock price.

[00:01:50] Daniel Mahncke: This contentious name is Match Group, a company I’m sure some of you are familiar with since they own Hinge, Tinder, Match.com, and a handful of other major online dating apps that we’ve all seen ads for, even if you’ve never used them. So to make a long story short, over the last few years, the Bears have unequivocally been winning out as Match’s, hit some roadblocks in growing their user base. Yet, the company is still very profitable today.

[00:02:16] Daniel Mahncke: And if they can prevent the business from continuing to decline long term, I think the stock will likely look very cheap in hindsight. So with that back to you Shawn, how about you tell us about the online dating industry more generally before narrowing in on Match Group?

[00:02:32] Shawn O’Malley: Hey, Daniel, good to see you again. I’m not sure whether the audience will like this pitch or not, because I’m a little conflicted about it myself, but boy did I learn a lot in doing the research on it. The online dating world is such a unique business, and the incentives and realities of these platforms are maybe not the same as you’d think with some of the other network effects we’ve looked at, like with Reddit as a social media company or with Uber as a two-sided ride-hailing network.

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• Check out the ⁠Pew Research findings⁠ on online dating.
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