Tinder Lawsuit Halts Red-Hot IAC, Match Stocks

The founders of Tinder are suing IAC/InterActive and Match Group

by Patrick Martin

Published on Aug 14, 2018 at 2:41 PM

Stocks are pushing higher today, as the Turkish lira rebounds from yesterday's record lows. Looking at individual names, internet stocks IAC/InterActiveCorp (NASDAQ:IAC) and Match Group Inc (NASDAQ:MTCH) are underperforming, while payments processor Square Inc (NYSE:SQ) is climbing. Here's a closer look at what's driving shares of IAC, MTCH, and SQ today.

Tinder Woes Drag IAC, MTCH Lower

The founders of dating app Tinder are reportedly suing IAC/InterActiveCorp for nearly $2 billion, on claims IAC "robbed Tinder employees by manipulating financial information, undermining Tinder's valuation and unlawfully stripping away their Tinder stock options." News of the possible lawsuit has sent IAC stock down 0.8% to trade at $189.57, despite earlier trading as high as $195.06 -- a chip-shot away from yesterday's record high of $195.91. IAC gapped higher following an upbeat quarterly report last week, and is up 81% year-over-year. 

Despite the pullback today, analysts have remained firmly in the bullish camp. All 15 of the brokerages covering IAC rate it a "buy" or "strong buy," while its average 12-month price target of $226.40 is a 20% premium to the security's current perch. 

Looking at Match Group, a subsidiary of IAC, the stock is down 4.1% to trade at $47.92. MTCH nabbed a post-earnings record high last week at $51.74, thanks to a sharp rise in paid users on Tinder. The shares still boast a 53% lead in 2018, and today's pullback has been contained by the $48 region -- home to their mid-April highs.

It seems a near-term pullback may have been in the cards for both IAC and MTCH. The stocks sported 14-day Relative Strength Indexes (RSI) of 80 and 74, respectively, at last night's close -- well into overbought territory.

Square Stock Gets Ambitious Price Target

Square stock is up 3.2% to trade at $74.70, earlier touching a record high of $74.90, after Nomura Instinet bumped up its price target to $86 from $82. The analyst in coverage noted that Square Cash App downloads surpassed PayPal's Venmo for the first time in July, and is growing at three times the rate of its direct competitor.

The new price target represents expected upside of 15% to SQ's current perch, and is the highest on Wall Street. Square stock pulled back in late July prior to its quarterly report, but the bear gap was caught by its 50-day moving average.

In the options pits, puts have become more prevalent in the past two weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows SQ with a 10-day put/call volume ratio of 0.60, which ranks in the elevated 92nd percentile of its annual range. This means that although calls have outnumbered puts on an absolute basis, the lofty percentile rank means puts have been purchased over calls at a faster-than-usual clip during the past two weeks. An extended surge from SQ could lead to an unwinding of these bearish bets.

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