We estimate eHarmony will see 7% annualized growth in revenue over the next 5 years, and will see solid margin expansion. We are comfortable with a valuation of eHarmony in the $700 million to $900 million range, and believe the midpoint of this range, $800 million, represents fair value.
GreenCrest's analysts have performed detailed channel checks with users, competitors, and industry experts in order to supply a comprehensive and proprietary view on the true underlying value of eHarmony.
Key Points from the 39-Page Report:
• The Internet has become one of the most common, if the not the very most common, dating destination of choice. Despite decelerating growth, the online dating market will continue to exhibit stability.
• eHarmony’s reputation as a place where users can meet compatible singles for meaningful, long-term relationships drives its strong brand image and puts it in an attractive competitive position relative to its peers.
• eHarmony has a stable financial profile. We project eHarmony’s revenuewill grow from an estimated $274 million in 2010 to $423 million in 2016, implying a CAGR of approximately 7%. Further, we estimate the company will see EBITDA margins growing from 28% to 34%, and be able to convert 70% of its EBITDA into free cash flow.
• We view the company as a potential takeout candidate. We believe the two most likely groups of suitors are large, content-driven, domestic media companies, and major online dating properties. In our view, this effectively narrows down the list to Yahoo and AOL in the first category and Match (owned by media conglomerate IAC/Interactive) in the latter.
• We are comfortable with a valuation of eHarmony in the $700 million to $900 million range, and believe the midpoint of this range, $800 million, represents fair value.
About GreenCrest Capital
GreenCrest Capital (greencrestcapital.com) provides clients with timely and innovative research into the companies and sectors we cover. To that end we have established a team of experienced analysts, researchers, economists and industry veterans that focus exclusively on private companies with a proven track record of success. Producing quality research on a private company is uniquely challenging. Our team’s collaborative examination employs forensic analysis combining primary research as well as secondary information sources. Our team of analysts and industry experts leverage years of experience working for bulge bracket firms. Our team utilizes fundamental analysis to deliver proprietary, innovative, insightful and thought-provoking reports.
About the Analysts
Anupam K. Palit, CFA, has 10 years of experience in equity research and capital markets, primarily within the technology, media, and telecommunications (TMT) vertical. Mr. Palit started his equity research career at UBS Securities and served as a Vice President in Jefferies & Company’s equity research group, where he specialized in the telecommunications and wireless services sectors. Prior to joining GreenCrest Capital, Mr. Palit was a Vice President in Evercore Partners’ Institutional Equities Group, focusing on analyzing Internet companies. Mr. Palit earned his Bachelor of Commerce in Finance from McGill University in Montreal, is an MBA candidate in the executive program at Columbia University, and is a CFA charter holder.
Nitsan Hargil, CFA, has more than 15 years of experience as an analyst in the technology and financial services industries. Prior to GreenCrest Capital Mr. Hargil's Wall Street career includes research analyst positions at Lehman Brothers, Kaufman Brothers, and Friedman Billings Ramsey (FBR). Mr. Hargil was recognized as a top analyst in The Wall Street Journal "Best On The Street" awards for best stock picking in software. Mr. Hargil frequently appeared on CNBC, CNN, CNNfn, Bloomberg TV, and has been quoted in The Wall Street Journal, Investor's Business Daily, The New York Times, The Washington Post, Fortune, and Business Week.
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