Author: Anthony Russo
Datingapps have been booming for years fueled by efficiency, convenience, and thefact that so many love seekers now do not have to brave approaching a strangerin a bar only to be turned down, their ego crushed. Being swiped left on isa lot better than buying someone a couple of drinks only to walk out with a fakenumber.
Addictiveby nature, dating apps have unsurprisingly exploded during the pandemic. Withbars and restaurants closed, a virtual date was about as good as it got duringthe height of the virus’ spread. They used to say there was only safer sex, not”safe” sex. Well, it doesn’t quite get any safer than copulating via zoom.
Accordingto market researcher Statista, which cited a survey of 131 people that were 18or older in April in the United States, 31% of respondents said they were usingonline dating apps or services “somewhat more” before the pandemic. Just 13% ofthe respondents were using virtual dating platforms “much less,” according tothe research.
Datingapps did not disappoint in their latest financial reports. But can they keep uppost-pandemic?
SwipeRight on Match Even at an All-Time High
By farthe largest publicly traded dating app operator in terms of marketcapitalization is Match Group, Inc. (Nasdaq: MTCH). And to nobody’s surprise,Match, which operates popular dating platforms including Tinder, Match.com,OkCupid, and PlentyOfFish, has witnessed an astronomical increase in demand.
Thedating apps are both similar in a sense that they both offer a system thatmatches users only if they’ve swiped right on each other. The biggestdifference is who can message first. Under Bumble, females are given the powerto send the first message and dictate the conversation. The same restriction tomen doesn’t apply to Tinder, as anyone can message first.
In the second quarter, Tinder gained roughly 200,000 users, bringing its averagesubscribers to 6.2 million. Also, direct revenue for Tinder also jumped by15%. In total, Match’s revenue soared 12% year-over-year to $555.5 million onearnings of $103.1 million, or 51 cents a share. The results easily beatestimates of $520 million in revenues and earnings of 45 cents a share.
BenjaminBlack, an analyst at the advisory firm Evercore ISI credited Match’s videofeatures that kept users engaged on its platforms amid the early stages of thepandemic.
“It’san important aspect right now to keep folks tethered to the brand,” he said.
Matchis now projecting to generate third-quarter revenues of at least $600 million,which was above the analysts’ projections of around $575 million, according toRefinitiv IBES data.
“Thatmomentum from Q2 really is going to carry into Q3 for us and we are optimisticit is going to carry beyond that,” Match Group’s chief financial officer andchief operating officer Gary Swidler said on CNBC’s Squawk Alley.
Thanksto the strong earnings, the stock is now trading at an all-time high since itdebuted on Nasdaq in November 2015. I would feel comfortable buying theDallas-based company at $115; Match should continue to see high demand during Covid-19.Too bad Bumble doesn’t publicly trade, because it just recently surpassed amilestone of 100 million users. In an interview with Bloomberg from October2018, Bumble’s founder Andrey Andreev was considering a Nasdaq listing and said”We’re now in very deep discussions with banks.” That will be an IPO to watch.
Anotherdating platform operator seeing demand surge is small-cap The Meet Group, Inc.(Nasdaq: MEET). While the attraction it gets is nothing compared to Match, thestock is certainly one to watch for sure.
MeetLikely to be Acquired by the End of the Year
In thesecond quarter, Meet’s revenues skyrocketed 74% from the same period in 2019 to$90.33 million, it said earlier this month. Net income rose by nearly five-foldto $10.38 million, or 14 cents a share versus $2.20 million, or 3 cents a sharein the same period a year ago.
Despite the strong results, it has failed to earn much appreciation in the stock marketsince posting its financials. The company opted not to provide guidance or hosta second-quarter conference call because of its pending agreement to beacquired by the German media group ProSiebenSat.1 Media SE (OTC: PBSFF) andprivate equity firm General Atlantic’s joint company NuComGroup.
Meet,which operates social media networking platforms including MeetMe, hi 5 andLOVOO, said the acquisition was an all-cash deal worth $500 million in Marchwith cash consideration to its stockholders at $6.30 per share. CEO Geoff Cooksaid in the company’s earnings report earlier this month that he expects thedeal to wrap up by year’s end.
“Wehave received antitrust clearance in the United States, Germany, and Austria,and our stockholders have approved the transaction,” he said.
Is thestock a buy? No, but investors should feel comfortable holding Meet. Shares ofMeet are up 24% YTD, as the company’s market cap sits at around $455 million.
ThisDating App Operator is a Sparkling Buy at $5 Per Share
On the internationalonline dating stage, one company likely to continue seeing demand is SparkNetworks SE (NYSE: LOV). While German-based Spark has been a big winner sincelate July, Spark struggled after pandemic triggered sell-offs in February andMarch; the panic sent its stock down to trading in the range of $2 and $3 per share
But nowthings have taken a sparkling turn for the company which operates Zoosk,EliteSingles, Jdate, Christian Mingle, and eDarling. Based on preliminaryfinancial results, Spark generated $114 million in revenue, beating itsprevious expectations of between $110 and $112 million.
It alsoraised its full-year guidance; Spark now expects revenue in the fiscal year2020 to be in the range of $224 to $228 million, up from between the $212 and$220 million it previously guided for.
Whilethis stock should continue to Spark, the company uses an old-school approach inattracting its customer base. Spark focuses on religious dating and users thathave serious relationship goals. Before buying, I would wait for the stock tofall to around $5 per share. You don’t want to marry this stock just yet.
NewlyListed Chinese Unicorn BlueCity Might be Worth Some Love
Yes,there are Chinese firms that publicly trade on Wall Street too. The two firmsare BlueCity Holdings (Nasdaq: BLCT) and Momo Inc. (Nasdaq: MOMO). However,both firms are completely opposite in not only their distinct offerings, but interms of financial performance as well.
Startingwith Momo, also known as the Tinder of China, failed to impress investors afterreporting its first-quarter financials in late May. After all, the results weremostly negative for the Chinese social networking platform. In the quarter, itsrevenues slipped 4% year-over-year to $507.6 million. It alsoreported its monthly active users declined to 108 million, down 6.4 millionfrom the same period last year.
Inaddition, the outlook Momo provided won’t make shareholders feel much better.In the second quarter, Momo anticipates generating revenue in the range of 3.8billion yuan to 3.9 billion yuan ($550 million), representing a decrease ofbetween 6% and 9% from the same period in the previous year.
As forBlueCity, it’s been an exciting last month or so for the LGBTQ+ dating appfirm, which was just recently welcomed to Wall Street. The excitement was justified,as the Chinese unicorn’s stock skyrocketed ashigh as 124% in its trading debut from its IPO pricing of $16 per Americandepositary share. While the stock has lost some ground since, Loop CapitalMarkets initiated coverage on BlueCity last week, issuing a”buy” with a price target of $20 per share.
Injustifying the buy, Loop Capital’s director of research Laura Champine wrote,”As Asian societies gradually become more open to the LGBT community, weexpect more community members to reach out to their peers digitally.”
Shecontinued “The Blued app has more experience and more members than anyother sizeable LGBTQ platform in Asia, and management knows how to make itsusers feel safe and connected. We believe the app’s rapid growth outside ofChina demonstrates the company’s ability to navigate in the fastest growingmarkets in Asia, including India, Vietnam, Thailand, and Korea.”
Thecompany’s app Blued is the largest LGBTQ community in China, India, Korea,Thailand, and Vietnam. It has users in more than 210 countries and regions. OnIPO day early last month, Ben Li the chief financial officer of BlueCity told CapitalWatchin a phone interview that the “U.S. is a very compelling market, but weare still at an early stage in exploring it.”
Headded, “Because our current users have similar social, entertainment andhealth-related interests across regions, we can leverage our branding, productexpertise and user insights to help us scale globally.”
Itwould, of course, face competition with California-headquartered Grindr in the U.S., which claims to be the world’s largest social platform for “gay, bi,trans and queer people.”
Whileyou should avoid Momo at the moment—you won’t want to miss BlueCity’s earningswhen the company posts them Aug. 26.
MatchCFO Says Video-Dating is “The Next Best Thing”
As the world looks for its first effective and safe vaccine, video-chatting might be agame-changer for daring apps. In an appearance on CNBC’s Squawk Alley earlierthis month, Match’s CFO and COO Gary Swidler said in regards to meeting peoplethat “doing it online doing it by video is the next best thing.”
Further,he noted, “I think it’s working out very well for people and I thinkpeople will continue to use it even when the pandemic passes.”
But the video-chatting segment is still in early stages, as Match is looking to addfeatures like games and icebreakers to make face-to-face calls more engaging,and less awkward.
Accordingto Statista, revenue in the online dating sector is forecasted to hit $1.754million in 2020. From 2020-2024, revenue is expected to grow at a compoundannual growth rate of 9%.
If youthought that our lives changed when online dating started to become the norm—ithas now reached an entirely new level thanks to Covid-19. Until the FDA swipesright on a vaccine, the future of dating will be virtual.