Key points:
- Match Group delivers on consistent growth, spurred by leading figurehead Tinder
- BMBL sits 60% below last years IPO price, but has delivered solid 42% year-on-year growth
- Morgan Stanley analyst argues Match weakness is overdone, reflective of wider dating trends
Dating companies obviously didn’t find themselves as priority portfolio picks over the last few years. The dating environment was effectively put on hold, but this didn’t stop users communicating on digital platforms like Tinder, Hinge, Match and Bumble. Looking past the pandemic, stocks like Match (NASDAQ: MTCH) and Bumble (NASDAQ: BMBL) appear undervalued, with current share prices not reflective of solid year-on-year growth.
Bearish catalysts continue to weigh on growth stocks; with macro fears pressuring sell-offs across markets. The online dating industry is still a largely emerging market, so now might be the time to reassess positions in arguably oversold company’s.
Looking at Match Group, the financials speak for themselves, providing useful insight into the current disconnected share price. We’ve seen prominent, consistent growth over the last few years. Total revenue has seen a double-digit growth rate of 16.4% over the last 4-5 years; largely attested to the global rollout of Tinder, and its immediate success.
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Whilst Tinder’s direct revenue grew at a clip of 51.6%, Match’s other brands only saw growth of under 2%, with advertising revenue also remaining stable at around $50M per year. The bigger picture presents a highly in-demand brand which consistently delivers on double-digit growth each year.
Bumble shares hold much of the same value. Albeit, the argument exists that Match has a more established economic moat, with its cash cow Tinder holding the company reigns. Still, Bumble is well positioned for the continued growth of the online dating industry, recently attracting investment from JP Morgan.
BMBL shares jumped more than 60% in March following a well-received Q4 earnings report, but is starting to tail off once again. The stock is still down more than 60% from its IPO price in 2021, and with solid 42% revenue growth year-on-year, the company is still in its early high-growth stage; hence the allure is understandable.
Morgan Stanley analyst Lauren Schenk noted that she would be a buyer on the recent weakness in Match Group shares, citing that the recent sell-off is a product of Netflix read through, rising Covid cases in Asia, and “mixed reads of Q1 third-party data”. Schenk believes that a Q1 miss, FY revenue and EBITDA guide down are all priced into MTCH’s current $77 price level. BMBL looks equally appealing at a cheaper price and with paralleled upside potential.
