Oppenheimer & Co analysts suggested that Match Group (NASDAQ:MTCH) Inc will have to increasingly lean on product improvements or raise prices, as marketing to a minority of daters is too expensive.
In an update to clients, they noted in their survey of 617 US singles ages 18 to 55, that more than 80% are already using online dating or are not interested, as 77% of current app users either do not want to pay for premium features or are already paying.
"This suggests pricing increases will drive more revenue than lower prices to attract new users," the analysts wrote.
They added that online dating will reach saturation in the US if product improvements don't recapture churned users, as their survey indicated that 68% of prior users left because it was hard to find good matches.
Analysts at Oppenheimer estimate Match Group’s potential capture/recapture rate of non-users and lapsed users at 5% and 12% of the total dating pool, respectively, and thus marketing to a small number of potential users would likely be expensive and an incremental headwind to margins.
They reiterated their ‘Perform’ rating on the stock, as its shares are only trading at a 7% discount to peers but would be "more constructive if its shares traded at a more material discount."
Shares of Match Group eased nearly 1% to $42.92 in early-afternoon trading on Wednesday and have gained 5% year to date.
Contact Sean at sean@proactiveinvestors.com