May 9, 2019

Axios Markets

By Dion Rabouin
Dion Rabouin

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Situational awareness:

  • Uber's shares are set to price today ahead of a Friday trading debut between $44 to $50. That's well below early estimates of $120 billion valuation. (WSJ)
  • Former Boeing engineers say the failures of the 737 MAX appear to be the result of an emphasis on speed, cost and profits above safety. (Bloomberg)
  • The Trump administration has finalized regulations forcing drug companies to tell customers the prices of medications over $35 for a month's supply. (AP)
  • Amazon is using its Echo Dot Kids devices to improperly record kids' conversations, a complaint to be filed with federal regulators alleges. (WSJ)
  • Bitcoin prices have risen more than 5% in the past 24 hours, breaking above $6,000 for the first time in 2019. (CCN)
1 big thing: Match is making a killing on lonely, single millennials

Illustration: Lazaro Gamio/Axios

Tinder has been absolute gold for Match Group, which reported first quarter earnings yesterday that sent its stock up 12% to an all-time high.


  • Tinder, which accounts for about two-thirds of Match's overall valuation and 55% of its subscribers, reported 4.7 million average subscribers, 1.3 million higher than last year.
  • In its earnings report Match Group said total quarterly revenue grew 14% year-over-year to $465 million. It also owns competing online dating properties, PlentyOfFish, OkCupid and Hinge. (Interestingly Match noted that FX losses because of the strong dollar knocked 4% off its revenue growth.)

Why it matters: There's been a lot of talk about the way millennials and Gen Z communicate and the growth of social networks like Facebook, Snap and Twitter, but no company has perfectly tapped the zeitgeist of young people coupling like Match Group.

  • Match also is in position to benefit from the trend of young people putting off marriage and staying single longer than ever before.

Recent data from Pew Research shows:

  • Half of Americans ages 18 and older were married in 2017, a share that is down 8 percentage points since 1990.
  • The median age at first marriage reached its highest point on record in 2018: 30 years for men and 28 years for women, according to the U.S. Census Bureau.
  • U.S. marriage rate are declining and divorce rates are rising among older Americans.
  • Young women today are much more likely to be working than in the past, making them less likely to get married.
  • About 6-in-10 millennials (57%) have never been married, more than 3 times as many as members of the Silent Generation when they were young.

Attitudes about online dating also are moving in Match's direction. The most recent available data from Pew shows only about 15% of American adults report having used online dating sites or apps, up from the 11% who reported doing so in early 2013. The most prominent growth has been in people 18–24, where it has nearly tripled, and people 55–64, which has doubled.

Don't sleep: The company also is diversifying globally, tapping into markets like India to further grow its reach. Match didn't break down earnings by country, but during the first quarter, it claimed a total of 8.61 million average subscribers — 4.36 million in North America and 4.25 million internationally.

Bonus: Face-who?
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Data: FactSet; Chart: Axios Visuals

Match's stock has been haunted by 2 developments over the past year. First, Facebook announced on May 1, 2018, that it was rolling out a dating app. Shares of Match fell nearly 10% the day after the announcement at Facebook's F8 developer conference.

Match also has spent much of the past 2 quarters fighting short sellers after forecasting fourth quarter financials below expectations in November and announcing a special dividend.

  • An April report from S3 Partners shows Match was the 4th most shorted company in its Interactive Media category, trailing only Alphabet, Facebook and Snap, with $1.16 billion of short interest — meaning traders are shorting a whopping 37% of freely traded shares.
  • Match was the 15th most shorted stock of all companies with over $1 billion in market cap, a February note from Goldman Sachs showed.
  • Hedge funds abandoned the stock in the fourth quarter of 2018 with ownership falling from 27% in the third quarter to 10% in Q4. Match's $3.9 billion market cap made it the largest of the most shorted companies.

How'd that work out for you: Since Facebook's announcement, Match's stock is up nearly 95%, per FactSet.

Yes, but: Match Group is being sued by the founder of Tinder for undervaluing the company to avoid paying out stock awards to employees.

2. Worrisome trend: weakest 10-year auction since 2009

Demand for benchmark 10-year notes at yesterday's U.S. Treasury auction was the worst in a decade, data shows, following Tuesday's sleepy 3-year Treasury note auction that also drew lackluster demand.

Why it matters: The historically weak auctions have come despite falling stock prices and strong buying of safe-haven U.S. debt for much of the year, showing diminishing appetite among some investors.

It's worth noting that data on foreign buyers of Treasury notes is reported on a lag, so it's not yet possible to know whether diminishing Chinese purchases are responsible. However, foreign investors, especially China and Japan, have accounted for a declining share of U.S. government debt buys during the early months of the year.

  • Traders tell Axios there's no clear fundamental reason for the drop.
3. Trade war escalation is changing Fed outlooks

Photo: Saul Loeb/AFP/Getty Images

It appears increasingly likely President Trump will raise tariffs to 25% on Chinese imports to the U.S.

Driving the news: At a rally last night in Florida the president said China "broke the deal."

  • "They can't do that, so they'll be paying" Trump said.
  • Chris Rupkey, managing director and chief financial economist at MUFG, wrote in a note responding to Trump's speech: "We are not sure who the president is addressing tonight in a campaign rally, but he is sure scaring the daylights out of the financial markets."

Why it matters: Economists expect the escalation to reduce 2019 and 2020 GDP growth for both China and the U.S. It could also change the outlook for the Fed, pinning down U.S. interest rates for the foreseeable future.

  • "This re-escalation of the trade war is going to re-enforce the Fed's desire to just be on hold, at least through the end of this year, but we think until the end of next year as well," Seth Carpenter, chief U.S. economist at UBS, said during a meeting at the bank's New York headquarters.

Futures markets show that Carpenter's assessment is actually quite generous. Investors have been pricing in at least 1 interest rate cut this year, and a greater than 20% chance of 2 rate hikes by January.

  • Simona Gambarini, markets economist at Capital Economics, said in a recent note that because of weakening inflation, the Fed is "even more likely to cut rates if the U.S. economy slows as we expect later this year."

This won't just affect the U.S. and China: Federico Kaune, head of emerging markets fixed income at UBS, expects that the escalation will lead to further "artificial but helpful" global easing by central banks.

  • "You will have the global economy, instead of normalizing monetary policy going the opposite way."
  • "All of these things might provide a cushion in the near term but longer term they open up the opportunity for further dislocations."
4. Entering phase 3 of the trade war
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Adapted from a Peterson Institute for International Economics analysis; Chart: Axios Visuals

One big question still unanswered by Trump is how much of the Chinese products the U.S. imports he actually plans to hit with tariffs. The answer will make a significant difference, not just because of the impact to China but because of the way the administration had set up the tariffs to be instituted.

  • So far, very little of the tariffs have actually hit consumers because most of the goods have been intermediate or capital, meaning they are used as components of items sold rather than things consumers buy directly. The next phase of tariffs could change that.
Dion Rabouin