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Bumble stock (NASDAQ:BMBL) was higher Thursday morning, and Match Group (NASDAQ:MTCH) lower, as new research from Wells Fargo favored the smaller upstart in the dating-service game.
The bank initiated coverage of Bumble (BMBL) at Overweight, praising the "sustainability" of app growth and noting that while it's not a structural share gainer, it benefits from underinvestment at rival Tinder.
"We believe Bumble app can continue to add [about] 500K payers/year over the medium term, despite a slowing online dating market. In our view, Bumble is taking meaningful share at top of funnel, primarily due to Tinder underinvesting on marketing," analyst Ken Gawrelski wrote.
To stay on that 500K/year trajectory would mean Bumble taking some 200 basis points of industry payer share per year, "which appears reasonable."
And he says "we struggle to reconcile Bumble's current multiple (8x '25 EBITDA)" with the consistent share gain, hence the bullish initiation. Bumble stock was up 2.2% early Thursday; Wells Fargo's $19 price target implies 34% upside.
As for Match Group (MTCH), Gawrelski started its stock at Equal Weight. It has a "compelling" valuation at 9x EBITDA, "but we are concerned Tinder is over-earning and that Hinge top of funnel share gains have limited incrementality to Match Group overall."
Tinder is still the favorite among users who use all three "swipe apps," he noted, suggesting that its top-of-funnel share losses are driven by marketing underinvestment.
Meanwhile, Hinge's top-of-funnel gains look to be "cannibalistic" to Tinder, Gawrelski said.
Investing the same amount of revenue into sales and marketing as Bumble (BMBL) would mean incremental costs of $195M to Match (MTCH) -- or 15% of Match's 2024 EBITDA, he estimates.
Match Group (MTCH) was down 0.5% early Thursday. Wells Fargo has a $32 price target vs. current pricing of $32.71.