Stocks to Love on Valentine's Day
Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This Valentine’s Day show them you care, with shares of a love-based company.
Online dating was once considered a dirty little secret, but now it is how 30 million Americans will find a date, according to market research firm Nielson. The business of love and online dating is a nearly two billion dollar industry, up from $900 million in 2007.
Men used to need a watering hole to meet a woman. Then they needed a matchmaker. Now they have the internet. According to a study sponsored by the world’s largest dating site, Match.com (owned by InterActive Corp (NASDAQ: IACI)), an historically unprecedented number of single Americans use the Internet to find love: nearly 1/3 of singles report they have dated someone whom they met online.
Spark Networks (NYSEMKT: LOV) unveiled a study of their own in January citing 87% of singles think online dating is a great way to meet people. The Match.com survey showed that 20% of singles met their most recent first date online vs. 7% who met at a bar.
InterActive Corp owns more than 20 operating businesses, comprising over 150 brands and products, in the following five segments: Search & Applications, Match, Local, Media and Other. The company is one of the largest site networks in the world, and is home to Match.com, OKCupid, Chemistry.com, and MeeticGroup, the European leader in online dating.
InterActive corp released 2012 fourth quarter earnings in early February. It posted a profit of $40.7 million, down from $48.8 million, a year earlier. Total revenue grew 28% to $765.3 million, beating analysts’ expectations. Revenue from dating sites like Match.com and OKCupid.com improved 16% to $182.6 million.
Match.com and Chemistry.com increased the number of paid subscribers (for a total of 1.8 million subscribers) by 8% compared to the same quarter in the previous year.
Spark Networks focuses on niche dating sites including ChristianMingle.com, SingleParentsMingle.com, and Jdate.com. Considering the survey results indicating that nearly three-quarters of singles are looking for a partner who shares their religious faith, the niche market approach seems wise, but the company's income says differently.
In the third quarter of 2011 Spark's revenue increased 25% year-over-year to $15.9 million, hitting its highest level in nineteen quarters. Average paid subscribers grew 29% to more than 266,000, setting another all-time high. The Christian Networks segment powered that growth, with an 84% increase in revenue, driven by an 89% jump in average paying subscribers.
Unfortunately, just like an online dating profile, a deeper look reveals the important details. Net income decreased a whopping 630% (from -$0.24 million to -$1.74 million) when compared to the same quarter one year ago. Earnings per share has declined over the last year, and analysts expect more of the same in 2013. For the next year, the market is expecting a loss of 264% in earnings.
Love knows no boundaries and is a very universal thing. While forty million Americans are looking for love online, China has 120 million potential dates searching the internet. Jiayuan.com (NASDAQ: DATE) is so popular in China that its name is synonymous with dating. Net revenues for the third quarter 2012 were $18.1 million, a year-over-year increase of 24.8%. Net income for the quarter was $2.5 million, down 35.9% from the year previous. Jiayuan only went public in May 2011, and opened at $11. It is currently trading at $5.56. Clearly the company still has a few kinks to work out before it can be considered entirely reliable.
The dating sites may be increasing in user numbers, but are clearly not flourishing in profits. And now there is a new competitor on the scene that may threaten the usefulness of dating sites even more. Facebook (NASDAQ: FB) recently launched its new “graph search” feature, which allows users to search for other users who have marked their relationship status as single. With graph search, Facebook members can search for other single users and filter the results based on their interests, education, age, hometown, current city and more — all while using natural language. With over a billion users already on Facebook, there are more fish in that Internet sea than in all the other sites combined.
But at the same time, Facebook may not be much of a threat at all. Several startups have already tried to use Facebook's social graph for dating, with no real success story. Kingfish Labs raised $500,000 in early 2012 to use Facebook for dating, but its first Facebook application, Yoke, never took off and was eventually sold.
Facebook’s most recent earnings may not have impressed analysts much, but they were more impressive than the other dating competition. Facebook's gross revenue in 2012 was just short of $5.1 billion, a 37% improvement over the previous year. Net income (non-GAAP) improved 6%. It’s not much, but it is better than Spark’s -629% plummet.
Keeping Up With the Times
While some websites suffer for a lack of keeping up with new technology and demands, man’s primal need for love has kept dating sites updating quickly. And since men (and women) are always on the go, it made sense to make the online dating process more mobile. Mobile dating revenue is expected to nearly double over the next five years, from an estimated $251.2 million in 2013, according to IBISWorld. Mobile dating on Match.com’s and OkCupid’s apps account for over half of all users.
Say It With Flowers
If dating stocks are just too risky for you, maybe consider sending shares of flower delivery magnate FTD (owned by parent company United Online (NASDAQ: UNTD). In the 2012 third quarter, the FTD segment reached its seventh consecutive quarter of year-over-year revenue growth, when prior periods are adjusted for the timing of the U.K. Mother’s Day in 2011. FTD revenues increased 7% from the year-ago quarter, while GAAP operating income was $8.4 million, a decrease of 58% versus the year-ago quarter. However, overall, the FTD segment of United Online is doing well. It was acquired in 2008, and the company is now looking to spin it off in upcoming months into its own publicly traded company. (Other Fools are fans of FTD as well.)
ErinAnnie has no position in any stocks mentioned. The Motley Fool recommends Facebook and Jiayuan.com. The Motley Fool owns shares of Facebook and United Online. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!