Match Group Inc. rose over 10% in post-market trading Friday following reports that it is going to be included in the S&P 500. The company, which owns Tinder, OkCupid and most other major dating apps in the U.S., has a market cap of over $41B.
Despite the anticipated “summer of love”, though, this is not Match ‘s highest ever valuation. At $148 a share, the stock is actually down from its all-time high of nearly $175 reached in February. Friday’s post-market jump to $164 makes sense, of course. The S&P 500 inclusion is virtually guaranteed to attract plenty of institutional money to the name. Individual long-term investors, however, might want to think twice before following suit.
The daily chart above reveals that the uptrend from the February 2016 bottom is an almost complete five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5) and has been developing within the parallel lines of a trend channel. The five sub-waves of wave (3) are also visible.
Valuation and Elliott Wave Analysis Caution Against Buying Match Stock
Note that waves (2) and (4) ended shortly before touching the 61.8% and 38.2% Fibonacci levels, respectively. If this count is correct, Match is currently trading in its fifth and final wave. As per the Elliott Wave theory, a three-wave correction follows every impulse. It usually erases the entire fifth wave.
Wave (5) is supposed to exceed the top of wave (3), so targets above $175 make sense. We wouldn’t be surprised if the stock makes it to $200 a share. In our opinion, that should be seen as a final take-profit opportunity by the bulls. The anticipated correction has the potential to drag Match back to the support of wave (4) near $130 or even lower.
Besides, at $148 a share, Match trades at 13.6 times its 2021 sales and a forward P/E ratio of 63. At $200, the earnings multiple would’ve expanded to 85. The S&P 500 inclusion certainly gave the bulls an excuse to make the stock even more expensive. This doesn’t make it a sound investment, though. Both Elliott Wave analysis and the company’s valuation caution against it.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!