Analysts unanimously missed the plunge in shares of Match Group Inc. and Bumble Inc. this year, and still don’t have a single sell rating on the online-dating companies. The difference is, now they have a much better chance of being proven right in their optimism.
(Bloomberg) — Analysts unanimously missed the plunge in shares of Match Group Inc. and Bumble Inc. this year, and still don’t have a single sell rating on the online-dating companies. The difference is, now they have a much better chance of being proven right in their optimism.
Investors fled the stocks as a weakening economy curbed subscription revenue and the strength in the dollar cut into international sales. Analysts have raced to keep up, slashing their earnings estimates and price targets on the stock.
Bumble fell 4.5% on Wednesday, on track for its eighth straight negative session. Match fell 3.3%.
The setup now is favorable because so much of the bad news is priced in and there are early signs that businesses is stabilizing. Match, the owner of Tinder and OkCupid, last week topped quarterly revenue estimates and pledged to control costs. Bumble could do the same when it reports on Wednesday but will have a higher bar to surpass given the growth expectations embedded in the stock’s price, said Angelo Zino of CFRA Research.
“Given Bumble is viewed as a high-growth name with limited profitability, meeting Q3 numbers and providing upbeat guidance will be key,” said Zino, who began covering both stocks last month with a buy rating on Match and a hold on Bumble.
Bumble’s stock has slumped 38% for the year. Match is down 68% over the same period, making it one of the worst performing stocks in the Nasdaq 100 Index.
While investors have punished the shares, analysts don’t have a single sell rating on the duo, and nor did they at the start of the year. Match has 16 buys and 5 holds, while Bumble has 10 buys and 7 holds, according to Bloomberg data.
Revenue growth for both companies has been slowing from the rate seen during the pandemic, when homebound users spent more time on their phones, and the immediate aftermath, when the economy was buoyant.
Analysts expect Bumble’s revenue to rise by 21% this year, down from 32% last year, while they see 6.9% growth for Match, a decline from 25% in 2021, according to data compiled by Bloomberg.
Bumble has fared relatively better than its larger rival because Match is dealing with company-specific issues. Its Tinder unit is dealing with issues including new brand campaigns, a search for a new CEO and a “new product roadmap that includes women’s experience, Gen Z-targeted product initiatives, virtual goods & coins,” said Shweta Khajuria, an analyst at Evercore ISI.
But the pace of analyst estimate cuts has slowed, cheering some of the bulls. In fact, analysts have raised their 2022 and 2023 earnings projections for Bumble over the past month, while their revenue forecasts for Match this year have stopped going down.
“For the first time this year, numbers have stabilized (for Match),” Morgan Stanley analyst Lauren Schenk wrote in a note. 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 own into year end,” she said.
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–With assistance from Ryan Vlastelica.
(Adds Wednesday trading.)
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