"In the years ahead, we expect the industry to benefit from a number of structural tailwinds including (1) erosion of social stigma, (2) increased access to the internet and mobile devices, (3) growth in the number of singles, and (4) heightened adoption of freemium models and subscriptions which we think will translate into sustained payer and revenue/payer growth for both Match Group & Bumble," said Goldman Sachs analyst Alexandra Steiger in a research note on Thursday.
Shares of Match, which owns Tinder, and Bumble by and large haven't priced in Steiger's upbeat industry thesis, reflecting concerns about social mobility amidst the COVID-19 pandemic.
Bumble's stock currently trades at $33, well below the $43 price set for the company early February 2021 IPO. As for Match Group, its stock has nosedived 30% since hitting a 52-week high on Oct. 21 of last year.
But now is the time to strike on each, Steiger thinks.
Steiger initiated coverage of Bumble at a Buy rating and a $54 price target, which assumes a 63% pop in the stock price. The analyst thinks Bumble is primed to capitalize on a strong outlook for dating by way of its female friendly user platform.
"By offering a women empowerment branding message, we see Bumble as uniquely positioned within the online dating landscape that should benefit from a number of secular industry tailwinds, continued platform innovation, domestic and international growth and category expansion (with Bumble BFF and Bizz)," Steiger says.
Steiger is slightly less bullish on Match, only modeling for a 27% increase in its stock price. But still, Steiger sees Match shares as one to own given its strong portfolio of dating assets (Tinger, Hinge, Match.com, OKCupid, Meetic).
Explains Steiger, "by offering a portfolio of dating apps that tailor to a certain demographic and/or geographic, we see Match Group as a leader in the large and growing global online dating market that should benefit from a number of industry tailwinds, continued platform innovation, domestic and international growth and category expansion, most notably into social discover."