Match’s Tinder Unit Growing User Engagement, Morgan Stanley Says

(Bloomberg) -- Match Group Inc. rose as much as 6% after Morgan Stanley said more people than expected downloaded its Tinder app last quarter during the pandemic.

As a result, second-quarter Tinder segment “net adds” are tracking above consensus and point to a bigger earnings beat.

Shares of the online dating app have dropped about 8% since July 1, when IAC Interactive completed its spinoff. User engagement has grown through the pandemic as stay-at-home orders forced more singles to date online, and Morgan Stanley expects positive commentary around engagement, video functionality and emerging apps to drive shares higher.

Analysts led by Lauren Cassel wrote that their mobile app download (MAD) tracker estimates Tinder’s second-quarter net additions surged 22% year-over-year to 327,000 versus a Wall Street consensus estimate of 117,000. She added that a smaller percentage of paying subscribers versus the first-quarter may offset some of that advantage.

Cassel noted that recent conversations with investors suggest tempered expectations heading into second-quarter results scheduled for August 4, but that investors remain bullish on the outlook for medium-term subscriber growth and the opportunity to convert more users to paying customers. Expectations around average revenue per user (ARPU) are lower, she added.

Cassell maintained her overweight rating and $103 price target while writing that “with the spin-off overhang removed, fundamentals are once again the sole focus,” expecting a revenue and Ebitda beat to overshadow any ARPU pressure.

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