MeetMe (MEET) Looks Undervalued as the Match IPO Set to Open - Roth Capital

With Match Group's (NASDAQ: MTCH) IPO is slated to open shortly, Roth Capital Partners analyst, Darren Aftahi, believes MeetMe's (NASDAQ: MEET) relative size, mobile growth and margin profile more closely resemble Plenty of Fish which was acquired for ~13.1x EV/TTM EBITDA. We believe this highlights the significant discount MEET shares still trade at, at ~6x EBITDA.

Management expects recently launched video and native chat ads to account for ~10% of ad load in 4Q. MEET previously said that the combined new ad units would add ~$1M of revenue in 4Q. However, we think native chat ads could see double the CPM rates of mobile display banner ads, while video ad units could reach $5-$10 CPMs.

MEET is on schedule to launch a new user recommendation engine in early December that will better optimize real-time engagement and relevance for users. Better user relevance should positively impact mobile daily active users (DAUs), which have seen some plateauing in the last few quarters as mobile monthly active users (MAUs) have continued to grow, especially in international markets.

MEET’s application is mostly used for meeting new people, flirting and dating. However, next year, it plans to expand user relevance to new tags beyond age, gender and location. It also plans to revamp its user interface to tie into interests with the use of tabs. This move could help users looking to meet new people around them go beyond just the scope of romance, and expand the use of the application to interest-based communities.

Match Group could be a catalyst for MEET given Match’s most profitable business, Plenty of Fish, looks more like MEET signifying that the stock could be undervalued even if it trades at a discount.

No change to Buy rating or $4.25 price target.

For an analyst ratings summary and ratings history on MeetMe click here. For more ratings news on MeetMe click here.

Shares of MeetMe closed at $2.57 yesterday.

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