Happy Tuesday everyone!

We are back to the grind this morning as the market itself continues to grind. Big gains were made yesterday on all major indices based on two key elements:

1. Investors are growing more optimistic that Donny politics’ chances to reclaim the White House have surged as the former president channeled his inner Ronald Reagan over the weekend.
2. Jerome Powell announced his long awaited indication that the Fed won’t wait until inflation hits 2% before cutting rates, as the man himself basically said, “We probably waited too long to cut”. Huh… ya think?

Every millennial home buyer right now… (Source: Giphy) 

Oh and let’s not count out the fact that J.D. Vance is now Trump's running mate as the campaign looks to appeal more to all the big swingin’ Democrat folks in Silicon Valley. So there’s that…

But as we all can see, there’s quite a bit of momentum being felt this morning as we approach today’s opening bell. 

In fact, there’s momentum being felt in places most investors have overlooked.

(Source: Giphy)  

For instance, while Match Group (NASDAQ:MTCH), which owns a portfolio of dating apps including Tinder and Hinge, is down 12% on the year (and more than 80% below their 2021 highs), Starboard Value has decided to take an activist stake of roughly 6.5% to “right the ship”.

(Source: CNBC) 

The result on the news? An 11% surge in extended trading yesterday after the news broke out. Not bad, not bad at all. 

(Source: Investopedia) 

However, while the result of the news for Match Group’s stock was positive, the letter that its management received from Starboard, ehh not so much. The position, led by Starboard’s Jeff Smith, started off the drama with a stern memo to Match Group’s CEO Bernard Kim and his board that basically stated: “It's time to stop swiping aimlessly and start focusing on product innovation and margin improvement. If not, it might be time for Match Group to go private.”

(Source: Giphy) 

Now of course, while it may seem like Starboard randomly woke up yesterday and decided it wanted to emulate Carl Icahn for a day, they have a history of playing the white knight in the tech world. 

Starboard’s track record has proven to be successful over the years, particularly with its positions in GoDaddy, Autodesk, Salesforce, and Splunk. Their activist prowess on Salesforce helped them make significant cost cuts to help the company expand more strategically…

(Source: Reuters) 

And their role in Splunk eventually caught the eye of Cisco who ended up purchasing the company for $28 billion last year.

(Source: Wall Street Journal) 

So apparently Starboard knows what’s up when it comes to technology. Which is why it’s no surprise that when they focused their sights on Match, the market jumped on the bandwagon.

But according to Starboard, Match’s bread-and-butter app, Tinder, has been dragging its feet in the innovation department, leading to a decline in paying users. Meanwhile, Hinge has been the golden child, thanks to its innovative interface and growing user base. 

(Source: Giphy) 

So it’s clear that one side of Match’s business is carrying the load, making Starboard’s game plan pretty straightforward. In short, the plan is to cut costs, boost product innovation, and maybe back some shares. Their argument with this strategy is that Match’s adjusted operating margin, which is currently at 33%, could hit over 40% with the right moves. They’re also pushing for Match to use at least 75% of its free cash flow for share buybacks. 

(Source: CNA) 

For Match Group, this could be a golden opportunity. Starboard believes that with the right tweaks, Match could generate over $5.50 of free cash flow per share by 2026. Which in turn would result in quite a few love notes from Wall Street (ratings). 

But, but, but… if the turnaround fails to happen, well Starboard suggests that it may be best suited for the company to go private aka a fancy way of saying “Just give up cause you suck” basically. 

(Source: Giphy) 

So obviously, if Match can simply get its sh^t together, it could definitely mean great things for the stock and the company’s future. It’s always nice to get someone with a great track record of doing things right on your team, and in light of the stern “threats”, Match Group should be thankful for this activist stake. 

Sure, it’s a tough love situation - but in simple terms, it’s better for investors. 

(Source: Giphy) 

So whether you’re interested in getting some skin in the game with Match Group, or you had no idea who or what this company was before this issue…

It might be a good idea to keep an eye on this stock. If news of 6.5% activist stake from Starboard can catapult Match Group shares 11% in extended trading hours…

Who knows what else could happen. So stay tuned and keep this baby on your watchlist! 

(Source: Giphy) 

Stocks.News doesn't hold any positions in companies mentioned in the article.