Grindr: The Untapped Value Of The Overlooked Rainbow Economy

seekingalpha10-18

Grindr is the largest LGBTQ app globally, with significant user engagement and ARPU potential, making it an attractive investment with a $16/share target.GRND's predictable subscription-based revenue ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2476443768?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2151624715/image_2151624715.jpg","is_english":true,"pubTime":"2024-10-18 10:39","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2476443768","market":"sh","top_or_hot":-1,"title":"Grindr: The Untapped Value Of The Overlooked Rainbow Economy","media":"seekingalpha","content":"<div>\n<p>Grindr is the largest LGBTQ app globally, with significant user engagement and ARPU potential, making it an attractive investment with a $16/share target.GRND's predictable subscription-based revenue ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727524-grindr-untapped-value-of-overlooked-rainbow-economy\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Grindr: The Untapped Value Of The Overlooked Rainbow Economy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGrindr: The Untapped Value Of The Overlooked Rainbow Economy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-18 10:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4727524-grindr-untapped-value-of-overlooked-rainbow-economy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Grindr is the largest LGBTQ app globally, with significant user engagement and ARPU potential, making it an attractive investment with a $16/share target.GRND's predictable subscription-based revenue ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727524-grindr-untapped-value-of-overlooked-rainbow-economy\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GRND","symbol_name":"GRINDR INC","start_time":0,"source_url":"https://seekingalpha.com/article/4727524-grindr-untapped-value-of-overlooked-rainbow-economy","article_id":"2476443768","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2151624715/image_2151624715.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2476443768","pubTimestamp":1729219157,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Grindr is the largest LGBTQ app globally, with significant user engagement and ARPU potential, making it an attractive investment with a $16/share target.GRND's predictable subscription-based revenue ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"GRND":"GRINDR INC","BK4077":"互动媒体与服务"},"translate_title":"Grindr：被忽视的彩虹经济未开发的价值","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GRND":0.9},"content_text":"Grindr is the largest LGBTQ app globally, with significant user engagement and ARPU potential, making it an attractive investment with a $16/share target.GRND's predictable subscription-based revenue model and industry consolidation drive ARPU growth, positioning it favorably compared to traditional dating apps like Tinder and Bumble.Increasing broker coverage and investor interest in the LGBTQ vertical will likely boost fund flow and investment in GRND, enhancing its market position.Non-membership services in e-commerce, healthcare, and lifestyle present long-term growth opportunities, potentially transforming GRND into a super-app for the LGBTQ community.   RgStudio/E+ via Getty Images We are bullish on Grindr (NYSE:GRND) and have a target valuation of $16/share, which implies a return of more than20% from the current level. Our key rationales are the following: First, GRND is the largest LGBTQ app globally with no clear runner-up and is the only share gainer within the dating app space. Second, GRND operates under a predictable revenue model, with industry consolidation and higher engagement drives the ARPU upside. Third, the investment community will gradually focus on the LGBTQ vertical, leading to steady fund flow into the industry leader. Fourth, investors can expect future broker coverage to drive investment interest and engagement. Finally, non-membership services in e-commerce, healthcare, tourism, and lifestyle will be a more significant long-term driver. Although the market is well-informed of GRND’s leading position in the LGBTQ social app vertical, we believe that the market is valuing the company as a traditional dating app rather than a social community with an upside in both user and ARPU growth driven by the enlarging ecosystem and supportive LGBTQ legislation globally. We believe the consensus is underestimating GRND’s global growth potential, making the current valuation highly attractive for long-term investors. Our calculated implied valuation of $16/share implies 30x 2024E P/E and 23x 2025E P/E, which, we believe, is justified given we are only assuming mid-to-high single-digit MAU growth and high single-digit payer penetration, which is conservative compared with Match (MTCH) and Bumble (BMBL) where payer penetration is around ~10-20%. Two key risks worth flagging on this stock: First, there is only a small float with 11% of shares outstanding, making this a volatile investment. Second, the company has been the subject of frequent negative headlines in which criminals use the app to extort users. The negative publicity could limit user growth in the long term, but it is worth pointing out that such incidents are also frequent in both Tinder and Bumble. However, we believe that the management should focus on creating a safe environment for its users to ensure the sustainability of the business. The de-facto leader in the LGBTQ dating vertical GRND is the largest LGBTQ app globally and is the only share gainer within the dating app space. GRND is the largest LGBTQ dating app in revenue (~$300m) and users (11m). Besides GRND, there is a long tail of niche LGBTQ apps along with a Chinese LGBTQ app (BlueCity), but there is no clear number 2 after GRND globally, making GRND the de-facto LGBTQ dating app with a global presence. Unlike heterosexual Tinder (MTCH US) and Bumble (BMBL US), that is suffering from a top-of-the-funnel challenge where younger users are shifting to offline events for dating or alternative apps (i.e. Instagram), GRND has been able to maintain high user engagement in terms of time spend and user growth per data from SensorTower. The high user stickiness allows GRND to convert and monetize paying users effectively, thereby driving higher ARPU and margins than conventional dating apps. GRND currently has ~12m monthly active users out of an estimated 540m LGBTQ population globally, implying an attractive upside in user growth and monetization given GRND’s first-mover advantage and growing network effect within this niche vertical. Predictable revenue model with ARPU upside Like most dating apps, GRND generates most of its revenue through a subscription model. This highly predictable revenue model works exceptionally well for the industry leader amid the industry consolidation, ultimately leading to higher engagement and ARPU upside. Unlike China’s largest LGBTQ app, BlueCity, which derives more than 70% of its revenue from heavily regulated online streaming, GRND derives 90% of its revenue from subscriptions (similar to Tinder and Bumble), with an ARPU of $20/month compared with traditional dating apps Tinder ($15/month) and Bumble ($22/month). The largely subscription-based model makes GRND's revenue profile highly predictable. Given GRND’s growing engagement, we expect an upside to GRND’s ARPU vs. traditional dating apps. In addition, GRND has been introducing new features within the app or turning previously accessible functions into paid functions on the back of higher pricing power. These changes to the app have not resulted in user or engagement churn, which underscores GRND’s pricing power, and I expect this status quo to remain in the foreseeable future.  Expect increasing fund flow on the back of rising investor interest  Two drivers will likely lead to growing fund flow for GRND in the coming years. From the brokerage side, we expect a growing number of analysts covering this stock given that it is the only growth stock within the listed social app companies since both Tinder and Bumble are experiencing top-of-the-funnel challenges where younger users are resorting to meeting in real life or alternative apps such as Instagram (META) for dating-related engagements. Given that most of these investment banks currently cover MTCH and BMBL, we expect adding GRND into the mix is a logical expansion of their equity research coverage. On the investor side, we expect growing investor interest in the global LGBTQ community given its large population that is highly willing to spend, which means this cohort will have material implications across several sectors, such as discretionary purchases, lifestyle, travel, apparel, luxury, cosmetics, and healthcare. This cohort consists mainly of white-collar individuals with high spending power. Private market investors appear to be informed of this theme and actively invest in LGBTQ-related startups, mainly in health tech. In contrast, our interaction with public market investors is that they are generally uninformed or do not understand this vertical well. Still, we expect those investing in the internet verticals will gradually appreciate the execution ability of GRND as it continues to deliver consistent operational growth. Non-membership services will be a more significant long-term driver With revenue driven entirely by membership subscriptions, GRND is well positioned to grow its app into a community ecosystem that provides its members with LGBTQ-relevant content and services, essentially turning itself into a super-app for the community. For example, online health consultation for the LGBTQ community is a multi-billion-dollar industry, along with travel and life services. GRND’s long-term goal is to become the gateway for LGBTQ-related products and services, given the lack of quality service providers currently in the market. There are 1.5m LGBTQ business owners in the US alone, contributing close to $2trn to the US economy annually, per the National LGBT Chamber of Commerce. The scale of the LGBTQ economy could transform GRND into a super app in the long term, given GRND’s growing engagement within this community. The key is for the management to understand this dynamic and effectively execute the initiatives to maintain its first-mover advantage. What is not priced in the current valuation? A few things worth flagging: First, we expect an upside surprise in paying users and ARPU growth. Many investors may question GRND’s pricing power and assume limited ARPU and user growth as GRND shifts some of its free features into paid features to improve monetization. Some investors expect user churn and that GRND may revert to free features to retain users. Our view is that there is an upside surprise to both ARPU and user growth, given other male-focused LGBTQ apps lack both excellent user experience and relevant functions when compared with GRND. In other words, GRND stands out in terms of good user experience, and its network effect is its competitive moat competing male-focused app cannot replicate in the near term. Second, we do not believe the market gives GRND enough credit for its potential to move beyond non-membership services. A near-term area to expand would be healthcare-related, where GRND could provide its members with health consultation and services. LGBTQ health is a highly active market for PE and VC investors, with startups valued between $500m—$1 bn in this niche vertical. In our view, surrogacy could be an area for GRND to explore, given that it is legal in California and is a high-margin business that will drive profit to the overall group. Other niche services could be e-commerce, such as providing essential LGBTQ products and online travel services to LGBTQ-friendly hotels and destinations. Finally, there is growing support for the LGBTQ-related theme on a macro level. Several countries are considering legalizing same-sex marriage, and we believe public market investors follow this trend. Countries such as Greece, Estonia, and Thailand recently legalized same-sex marriage. Japan and Korea are also likely to make progress, given the debate happening in the country. GRND is operational in all these markets, and positive regulatory trends on LGBTQ will be a strong catalyst for this stock. Valuation GRND has grown its users at a high single-digit percentage, and we expect this to continue as GRND remains the best app within the LGBTQ space. Other apps in the space either lack scale or function, and GRND is a significant player in establishing a self-reinforcing cycle of network effect and monetization model. More importantly, we expect payer growth to accelerate in the later years as GRND converts freemium users into paying users as more functions are introduced within the app. Our 11% payer penetration for 2029E could be conservative, given both Tinder and Bumble have payer penetration well above the 20% level. Company report, Astrada Advisors We applied the cost of debt at 8.5% according to the recent yield of GRND’s debt restructuring and the corporate tax rate of 20%. For the cost of equity, a US 10-year yield of 3.5% is applied along with a beta of 1.5, given that GRND exhibits higher volatility due to its growth profile and limited float. Assuming a 90/10 capital structure, we derive a WACC of 12%. We applied a 5% long-term growth rate for terminal growth, given GRND’s highly FCF generative business model. All things considered, we derive an implied value of $16/share or 20% upside.  Company report, Astrada Advisors","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2476443768"}