Online dating is not a new trend by any means, but you might be surprised to learn that roughly only 25% of singles around the world currently use online dating products.
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As such, J.P. Morgan’s Cory Carpenter thinks there’s much room for “secular growth” in the segment. Until now, Carpenter has believed the best way for investors to play this opportunity has been through industry leader Match. However, following talks with Bumble’s (BMBL) management, and due to a far more appealing valuation, Carpenter has changed his mind, and shifts his preference to Bumble.
“We come away from our BMBL management meetings increasingly confident in Bumble app’s trajectory & longer-term positioning within the dating/relationship ecosystem,” the analyst said.
BMBL shares have been mostly on the backfoot since the February public debut and the decline only accelerated since the release of Q3’s results. But Carpenter thinks investors homing in on app payer growth slowing down in the quarter does not take into account what has otherwise been “very strong underlying Bumble app momentum.” This is evident in MAUs (14.5 million, +21% year-over-year, as per Apptopia) and DAUs, which are showing faster growth than MAUs, according to management.
The company has put the Q3 app payer slowdown to the impact of a temporary Google Play payment restriction. However, with that overhang out of the way, Bumble anticipates app payers will “meaningfully increase” in Q4.
Additionally, driven by “product & monetization focus on the pre-match experience, lower-end tiers (i.e., college bundles), & consumables,” Carpenter believes Bumble app net adds in 2022 will trump 2021’s performance. And although there are risks involved – including a worsening Omicron situation and the possibility international expansion will not go as planned – with the share price still down significantly since Q3’s earnings, the analyst believes the risks are “more than priced into BMBL shares.”
To this end, Carpenter upgraded BMBL’s rating from Neutral (i.e., Hold) to Overweight (i.e., Buy) and has a $55 price target for the shares. Investors are looking at returns of 50% from current levels. (To watch Carpenter’s track record, click here)
Carpenter’s target is the same one as the Street’s and barring 2 Holds, all 6 other analysts agree with his positive assessment. As such, the stock boasts a Strong Buy consensus rating. (See Bumble stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
