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Match Group (MTCH +7%) gaps up to its best level in three months today after Starboard Value disclosed a 6.6% active stake in the company and sent a letter to the Board imploring them to look into alternative value creation opportunities. Starboard is a hedge fund seeking undervalued companies with which it can actively engage to identify untapped opportunities.

With Starboard jumping on board to turn MTCH around, the question is whether MTCH can seize enough opportunities to reverse course and possibly return to pandemic-style growth.

• MTCH's latest Q1 report did not exactly paint a rosy picture of the online dating app world. Payers declined by 6% yr/yr to 14.9 mln, with MTCH's largest app, Tinder, seeing an even broader decline at 9% to just under 10 mln. The discretionary spending environment remains suppressed, a troubling trend for a company that started out offering many of its apps for free with most features included. Transitioning toward hiding additional features behind a paywall has negatively impacted the app's recent growth trends.
  • MTCH has not been alone in the challenges the current macroeconomic environment poses. Rival Bumble (BMBL) delivered a similarly underwhelming quarter, headlined by a 6% drop in its primary Bumble app's average revenue per paying user (ARPPU). However, it should be noted that BMBL saw positive paid user growth yr/yr in Q1, possibly underpinning market share capture.
• However, management was confident it could satisfy its user base, noting that it is doubling down on improving its current features while introducing new offerings at affordable prices. MTCH anticipates the fruit of its labor will culminate in higher a la carte revenue, which it refers to as ALC revs, during the back half of FY24.
• While Tinder has not performed up to par, MTCH's other popular app, Hinge, has enjoyed solid growth, boasting a 31% jump in payers yr/yr in Q1 to 1.4 mln while revenue per payer climbed by 14%. Hinge has proven popular at home and abroad, growing by 20% globally in Q1. Hinge remains a core aspect of MTCH's long-term focus. It seeks to grow the brand into a $1.0 bln revenue business, more than double what it delivered in FY23. Hinge was likely a compelling feature to Starboard, which may look to accelerate its monetization efforts.

Starboard's active stake is a vote of confidence in MTCH's ability to take advantage of its meaningful brand recognition across the U.S. and in other Western European markets. However, past quarterly results were disappointing, especially compared to some of its competitors. While today's jump could be the start of a more significant rally, it may be better to wait and see how MTCH performs over the next two to three quarters to see if the macroeconomic landscape begins to turn more favorably and MTCH can reverse its string of declining paying users.