On-Line Dating Stocks Might be Poised for a Rebound

Investors have recently fled the two biggest dating stocks, Match Group (MTCH) and Bumble (BMBL), as a weakening economy curbed subscription revenue and as a stronger dollar cut into international sales.  Most analysts missed the downturn in the sector, with no single sell rating on the online dating companies.  However, with most of the bad news priced in, the sector might be poised for a rebound.

Online dating companies might be showing early signs that business is stabilizing.  Match Group, the owner of Tinder and OkCupid, reported better-than-expected quarterly revenue estimates last week and pledged to control costs.  CFRA Research said it will look at Bumble’s quarterly earnings results, which will be released later today, for signs that the stock may have also turned the corner. CFRA Research has a buy rating on Match Group and a hold on Bumble.

Match Group has plunged -67% this year, making it one of the worst performers in the Nasdaq 100 Stock Index ($IUXX) (QQQ), while Bumble has slumped -35%.  While investors have punished the stock prices of both companies, analysts don’t have a single sell rating on the stocks, nor did they have sell ratings at the start of the year.  According to Bloomberg data, Match Group has 16 buy ratings, and 5 holds, while Bumble has 10 buys and 7 holds.

Revenue growth for online dating companies has been slowing from the rate seen during the pandemic when homebound users spent more time on their phones and computers.  According to Bloomberg data, analysts expect Match Group’s revenue to rise +6.9% this year, a decline from +25% in 2021, and Bumble’s revenue to increase by +21%, down from +32% last year.  Bumble has fared better than its larger rival because Match Group is dealing with company-specific issues.  Match’s Tinder unit is dealing with issues including new brand campaigns, a search for a new CEO, and a new product roadmap.

The current pace of analysts' estimate cuts has slowed for online dating companies, a potential supportive factor.  Also, analysts have raised their 2022 and 2023 earnings projections for Bumble over the past month, while revenue forecasts for Match Group this year have stopped going down.  Morgan Stanley said, “for the first time this year, numbers for Match Group have stabilized.” It’s one of the only internet stocks where the threat of reduced guidance for next year “has largely been removed, making it one of the safer names to won into year-end.”

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