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Will Tinder & PMC Growth Aid Match Group (MTCH) Q3 Earnings?

Match Group, Inc. MTCH is set to report third-quarter 2017 earnings results on Nov 8.

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 slightly better, as the company’s earnings beat estimates twice for as many misses in the trailing four quarters, for a modest average positive surprise of 3.4%. Last quarter, it missed estimates by 15.8%.

However, we anticipate Match Group to score an earnings beat in the to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model shows that Match Group has the right combination of the two key ingredients. 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. This is perfectly the case here as you will see below:

Zacks ESP: Match Group has an Earnings ESP of +6.29%,as the Most Accurate estimate of 23 cents is pegged above the Zacks Consensus Estimate of 22 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 2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

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.

Factors Driving the Better-than-Expected Results

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 are anticipated to prove to be favorable in 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 15% year over year, driven by solid contribution from Tinder, PlentyOfFish, Pairs 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 the recently acquired — 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. Early results of the service are very promising, and it should benefit the results of the quarter under review.

In the last quarterly report, Match Group had given its revenue projections for third-quarter 2017 in the range of $322-$332 million (reflecting 14% year-over-year growth at the mid-point), with an adjusted EBITDA of $110-$115 million for the quarter.

However, a slight delay in launching Tinder Gold globally and 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, which are also driving higher-than-expected data costs.

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:

Take-Two Interactive Software, Inc. TTWO, with an Earnings ESP of +5.69% and a Zacks Rank of 1, is expected to release quarterly numbers around Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mylan N.V. MYL, with an Earnings ESP of +3.92% and a Zacks Rank of 2, is slated to report results on Nov 6.

CareDx, Inc. CDNA has an Earnings ESP of +11.77% and a Zacks Rank of 2. The company is likely to release earnings around Nov 9.

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Match Group, Inc. (MTCH): Free Stock Analysis Report
 
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