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Does the Return to Normal Justify Unusual Options Activity for Match (MTCH)?

Barchart - Tue Sep 6, 7:05AM CDT
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Fundamentally, Match Group (MTCH) – which owns a global portfolio of popular online dating services – should benefit from pent-up demand. After all, millions of singles everywhere essentially had two years of their social lives ripped away from them. Therefore, bullish traders see a short-term opportunity with MTCH stock, bidding up options contracts in the derivatives market. Still, it won’t be an easy narrative to follow.

A few weeks ago, Match disclosed its results for the second quarter of 2022. Frankly, the numbers didn’t impress onlookers. The company posted an earnings loss of 11 cents a share, comparing very unfavorably to positive earnings of 46 cents a share in the year-ago quarter. Also, Zacks Equity Research featured a consensus earnings estimate of 70 cents a share.

On the revenue front, Match rang up sales of $794.5 million. To be fair, this figure represented a year-over-year lift of 12%. However, it missed the consensus target by a hair under 1%. Per Zacks, “Excluding forex, the top line increased 19% year over year to $842.3 million, driven by continued steady growth in both payers and revenue per payer (RPP).”

Still, the results left investors wanting more. On the day of the earnings disclosure, MTCH stock plunged. Although shares gradually crept higher, it’s mostly been on a downward trek. In the trailing month through the close of the Sept. 2 session, Match shares slipped 17%. For the year, they’re down 59%.

Nevertheless, MTCH recently became the subject of unusual options activity.

Traders Eyeballing Quick Profits for MTCH Stock

When the closing bell rang out for the Sept. 2 session, market observers noticed that an unusually large number of Match calls were acquired. Specifically, traders dove into the $57 calls with an expiration date of Sept. 9, 2022 (this coming Friday). Volume reached 1,744 contracts against an open interest reading of 122.

In the open market, MTCH stock closed at $55.18. Therefore, it only needs to rise 3.3% to be in the money. However, shares have been volatile lately, which is something to consider before prospective traders consider this transaction. The bid-ask spread for this wager as represented by the midpoint price (78 cents) was about 10.3%.

Although this double-digit spread is quite wide, it’s not terribly surprising. MTCH stock isn’t the most heavily traded security, which features an average volume of 3.08 million shares traded. As well, because anything is liable to happen in this wild environment, market makers may have elected to give themselves a wider margin of safety.

Interestingly, though, the put/call open-interest ratio stands at 0.72. Typically, 0.70 represents the delineation between bullish and bearish sentiment, with metrics higher than 0.70 indicating that traders are buying more puts than calls.

Therefore, while the general sentiment in the options market for MTCH stock is bearish, it’s not overwhelmingly so.

Strong Fundamental Catalysts

What might end up making MTCH stock intriguing from a longer-term perspective is the underlying human catalyst. As The New York Times mentioned in August of last year, the COVID-19 pandemic has been especially tough for singles.

Per NYT’s Daniel Victor, “But those who have been single through the isolation, fear and upheaval say they’ve been confronted with a distinct set of challenges — not necessarily more or less severe than those who are coupled up, but different. Some who said they were content with being single before the pandemic have nonetheless struggled with what they’re missing in emotional support and even routine physical touch.”

Fortunately, the return to normal could represent an opportunity for many people to connect with others and hopefully spark new relationships. Broadly speaking, such a circumstance would be positive for MTCH stock. With the underlying company’s vast global portfolio, Match can serve a ready international audience.

Plus, the return to the office can also help Match indirectly. As people learn to communicate and interact with others in-person, that may facilitate confidence in striking up conversations of a more personal nature.

Better yet, the above doesn’t just represent empty musings. Per Zacks’ analysis of Match’s Q2 report, “the number of total payers increased 10% to 16.3 million. The number of total payers from the Americas, Europe, and the Asia Pacific (APAC) and Other increased 4%, 5% and 32%, respectively, on a year-over-year basis.”

Compelling But Challenging

It’s worth reminding that MTCH stock has so far not responded well to the gradual normalization of society. Over the trailing one-year period, shares have plummeted more than 65% of market value.

At the same time, if pent-up demand can spark consumer phenomena such as retail revenge or revenge travel, it almost seems inevitable that demand for personal and social interactions will rise. Ultimately, these interactions are what make us human and the pandemic denied them for a very long time.

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Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.