This Company (And Its Customers) Will Go Crazy With the U.S. Reopening
I don’t need to tell you that Wall Street and retail investors are bullish about the economy.
The International Monetary Fund expects U.S. GDP to hit 6.5% this year.
JPMorgan Chase CEO Jamie Dimon suggested that an epic economic surge might last well into 2023.
And people are buying stocks hand over fist in retail, cruise lines, movie theaters, airlines, and theme parks. If it’s something to do outside the home, people are buying in.
They’re calling it the Great Reopening for a reason. It feels like people are ready to party like it’s 1929 and 1999 combined.
There’s one reopening trade that so many investors have overlooked.
But Ideas by TradeSmith is here once again to guide us into terrific stocks with very compelling stories.
When this stock entered the Green Zone two weeks ago, my eyebrows raised.
And the more I looked into it, the more I agreed that this might be one of the best ideas yet.
What do you say we make it a date and explore this trade idea?
Meeting Your Match
I can’t imagine what it would be like to be in my 20s, in New York City, and unable to leave my apartment for an entire year. The lack of human interaction would drive me crazy.
But that’s what happened, and all the hotspots across the “Finance Capital of the World” shut down. They’re just starting to open back up.
Of course, people are buying stocks like Darden Restaurants (DRI) and Brinker International (EAT).
Both companies operate restaurants ranging in a variety of scales and price ranges. Darden owns the ritzy chain The Capital Grille and the more laid-back Olive Garden. Brinker owns Maggiano’s Little Italy restaurants and Chili’s (fun fact, Valentine’s Day is one of the busiest days of the year at Chili’s.)
But why invest in the restaurants after their stock prices surged in recent months?
Instead, think about investing in the people going to the restaurants.
That idea brings us to the dating conglomerate Match Group (MTCH).
This is the company behind Match.com, Tinder, OkCupid, PlentyofFish, and more and has been around for 25 years. Today, it operates dating apps and services in more than 50 countries in 12 languages.
People never used to date online.
They viewed the process as taboo. They mocked people who met on the internet.
It used to be that people met their dates in traditional ways. The most common methods of meeting someone since 1940 were through family and friends, at church, or in the neighborhood. All have been in decline.
And people have turned to digital apps as a source of finding love, friendship, or whatever suits their interests.
Pre-pandemic, 30% of adults used online dating apps, according to Pew Research Group. The pandemic pushed online dating and interaction online in 2020.
Now, with the reopening coming all around the world, Match Group has several tailwinds that could drive the stock much higher.
Looking at the Events
Match Group has two primary product events that create a compelling narrative.
First, it has launched Tinder Platinum. The “Swipe Left/Swipe Right” app has a more notorious reputation than it probably deserves. The Platinum level of the platform, its highest of four tiers, cuts through the traditional messaging and matching apparatus.
(I won’t get into the details because if I spend too much time researching Tinder for this article, someone in my house might start asking questions.)
Its premium price point is rather significant but, based on the successful gamification of the dating process and the urgency that the Platinum level creates, this could be a cash cow for the company.
One month is priced at $39.99, while a full year costs $199. So far, it’s done well in its limited rollout. A rollout worldwide in the second half of 2021 might push this stock into the stratosphere.
There’s nothing like reliable cash flow, and this could be a great source moving ahead.
Second, the company just purchased a social discovery and video tech firm called Hyperconnect. Based in Seoul, South Korea, Hyperconnect capitalized on the growing trend of video communications. Younger users are willing to use voice and text over traditional email methods. (Match Group paid more than $1.73 billion for the firm.)
Hyperconnect’s flagship app, Azar, already has 540 million downloads in six years. Across Match Group’s suite of global dating apps, it could easily add hundreds of millions more and monetize these users in very new ways.
One new way is the increasing tradition away from just dating apps. Match has followed competition into creating apps designed to help people make friends. In 2019, Match partnered with a media firm called Betches to
create a new app called Ship.
Ship allows people to make friends and pick out potential dates in the future. Like other dating apps, friendship and social apps enable people to post bios, find friends in local areas, and schedule events.
Thanks to Match’s new, emerging brands, one analyst at investment banking and capital research firm BTIG suggested that it could quickly generate more than $1 billion in revenue annually in the years ahead. They put a price target on the stock at $175 (a nearly 20% upside from Wednesday’s closing price.)
A few other analysts have suggested it could press even higher in the second half of 2021.
Here’s the Deal
TradeSmith remains the most powerful tool for finding great trade ideas. It provides all the quantitative analysis that you need to find a single stock idea, identify the right entry point, and set the ideal stop loss to protect your profit and principal over time.
If you’re a set-it and forget-it investor like me, it can’t get easier.
You don’t have to dig in and do all the research as I did on Match Group.
But I like to know the story. So, when a stock is in the Green Zone, and I want to buy it, I’ll do additional research. Or, I’ll reach out to Chief Research Officer Justice Clark Litle for his thoughts.
Speaking of Justice…
I’ll be talking to him next week about the best way to reduce bias when you’re buying and selling stocks. Tomorrow, I’ll be back with ANOTHER reopening stock that popped up in TradeSmith’s system.