By Teresa Rivas
Misery loves company. So if you've been burned by online dating, it might help to knowyour matchmaker might be just as unhappy.
One is the loneliest number, but two truly can be as bad as one when it comes to downgrades.
That's the uncomfortable position Tinder owner Match is in after an analyst swiped left on the dating app stock for the second time in this week.
Making connections, it seems, isn't as bankable as it once was -- at least in traditional pairings.
On Wednesday, JPMorgan's Cory Carpenter lowered his rating to Neutral from Overweight and his price target to $33 from $40. The move comes as spending on online dating across the globe "remained stagnant" this year, a pattern he expects will continue next year as well.
Carpenter forecasts industry growth of just 1% for 2024 and flat in 2025 because of a lack of product innovation -- more than a decade has passed since "swiping" on a potential match was introduced. Today, dating apps resonate far less with the younger crowd.
With just about 12% of the world's singles online -- equivalent to about a quarter of active daters -- Carpenter is still optimistic about the industry's long-term secular growth, especially as increasingly sophisticated artificial intelligence applications drive future innovation.
Yet, as The Supremes -- and later Phil Collins -- sang: "You can't hurry love," or its impact on top-line growth.
"We learned this year that product-driven turnarounds take time, with AI product enhancements limited to date and Match/ Bumble still early in their efforts to reinvigorate user growth," Carpenter writes. "Indeed, we expect revenue to decline for Tinder and Bumble in 2025, with Tinder not forecasted to return to growth until 2027."
That reasoning led Carpenter to downgrade Match and maintain a Neutral rating on Bumble, even with the possibility of industry consolidation ahead.
Match's first downgrade -- sort of like a rejection, if you will, came on Monday, after the company's investor day. New Street Research analyst Dan Salmon cut his rating to Neutral from Buy and his target price to $34 from $48.
Salmon cited a lack of visibility in terms of how Match will improve Tinder monetization.
"We expect shares to be supported by both a new 2% dividend yield and consistent share buybacks, but there is still no sign of consistent monthly average user improvement at Tinder and the lack of detail on how management aims to reverse weakening revenue trends leads to low conviction that new Tinder guidance is conservative enough, let alone if upside can be achieved," he wrote
After the two downgrades, just half of the 30 analysts tracked by FactSet are bullish on Match, although he average analyst price target of nearly $37 implies 16.5% upside.
Bumble is even more unpopular, with just a quarter of 24 analysts rating it at Buy or the equivalent, and an average price target not far above where the shares trade today -- about $8.
Match is off 14% this year and Bumble has tumbled nearly 44%.
The prolonged slump in online dating trends means these companies have struggled to attract and retain users and meet investor expectations. Both Match and Bumble are deep in the red since going public in 2020 and 2021, respectively.
The industry does have a bright spot: LGBTQ+ daters. Shares of Grindr, which caters to lesbian, gay, bi, trans, queer and other people that don't identify as heterosexual, have nearly doubled so far in 2024.
Goldman Sachs analyst Eric Sheridan initiated coverage of the stock with a Buy rating and $20 price target on Monday, citing a large and growing addressable network and a compound annual growth rate of more than 20% over the five year spanning 2024 to 2029.
"We see Grindr as a revenue compounder with high margins that are positively levered to a number of long-term secular growth themes/opportunities within online dating," he wrote.
"While the online dating sector has been impacted by ongoing investor debates around sources of user growth and user time/engagement," he said, "we see Grindr as having a user demographic and core proposition that has performed well against such debates (which we expect to persist into 2025 and beyond)."
All four analysts who cover the shares are bullish, with an average price target of $19.50, implying 15% upside.
Who says love can't still be lucrative?
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 18, 2024 13:52 ET (18:52 GMT)
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