Why the Match.com IPO Valuation Could Top $3.4 Billion (Nasdaq: MTCH)

The Match.com IPO will price on Wednesday, Nov. 18, and a price range of $12 to $14 per share has been set.

At the high end of the range, the Match.com IPO valuation will hit $3.4 billion. While the Match.com IPO valuation is high, that's actually about $800 million less than some analysts had expected.

The provider of dating products, including Match.com, OkCupid, and Tinder, aims to raise as much as $536.7 million by selling some 33.3 million shares. Shares will list on the Nasdaq under the symbol "Nasdaq: MTCH."

Analysts think Match is trying to attract interest with a low price amid a sputtering IPO landscape and volatile markets.

match.com ipo valuationFriday, online mortgage lender LoanDepot delayed its IPO citing market conditions. Last month, supermarket operator Albertsons Cos. withheld its IPO. Luxury retailer Neiman Marcus also decided to wait. French music-streaming service Deezer recently delayed its IPO citing "market conditions." Online dating platform Zoosk Inc. withdrew its IPO plans earlier this year after more than 12 months of delays.

Last week, mobile payment startup Square Inc. sought a valuation of about $3.9 billion. That was far less than the $6 billion price tag put on the firm a year ago.

By lowering the Match.com IPO valuation and its share price, MTCH hopes more investors will jump in. But even at the lower price, many are still wondering if the $3.4 billion valuation is justified...

What the Match.com IPO Valuation Means for MTCH Stock

Part of the reason for the high valuation is Match's rising revenue.

The Dallas company says it has turned a profit in each of the last three years and had $1 billion in revenue over the 12 months ended June 30.

Earnings for 2014 were $148 million on revenue of $888 million. That was up 11% from $126 million in 2013, and up from $90.3 million in 2012.

The company continues to reinvest heavily in growth, and so far it has worked...

Collectively, Match Group boasts 59 million active monthly users, including 4.7 million paid subscribers. Its dating services introduce people in 38 languages across an astounding 190 countries.

Its app Tinder is the fastest growing online dating site. It's projected to record $1 billion in revenue and a net income of $177 million for 2015, with a valuation of $1.3 billion

The Match.com IPO filing revealed details on how it expects to generate more revenue from its online dating properties...

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The company intends to "meaningfully increase" the number of ads it sells on Tinder. Match said Tinder's "strong user engagement" - 9.6 million daily active users who spend an average of 35 minutes a day on the app - "makes it a very attractive platform for advertisers."

Digital advertising revenue continues to grow at a rapid rate. Domestic digital advertising revenue surged 19% to $27.5 billion during the first six months of 2015, according to PricewaterhouseCoopers. Digital advertising is expected to become the No. 1 media category in 2016, according to a comScore.

Part of Match's success has come from launching new apps and features, such as the swiping right or left that has become Tinder's signature. Tinder makes money from the fees it charges users, between $9.99 and $19.99 a month for special features.

And the online dating industry is booming. It's worth $2 billion and growing.

Money Morning Capital Wave Strategist Shah Gilani says online dating is so powerful he calls it a "Disruptor of Disruptors." The industry is forcing change amongst those companies whose influence is upsetting an array of sectors, markets, and disciplines.

"Match is profitable, and they're growing their top and bottom lines," Gilani said. "But while I think the Match.com IPO is a smart move, there are a few issues that give me pause."

A key concern is that Match Group won't be completely independent.

Parent company IAC/InterActiveCorp (Nasdaq: IACI) will own 86% of the new shares. That number could rise to 38.3 million shares if underwriters pick up an additional 5 million shares, which they'll do if investors drive the stock price up.

Another concern is that apps and online services of this nature always run the risk of user confidentiality problems. The Ashley Madison hack in late August is the perfect example.

Gilani doesn't recommend investing in the Match.com IPO now, but there is still a way for investors to profit from the deal...

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