What happened
Shares of online dating app giant Match Group (MTCH 0.79%) rocketed 12.8% higher on Wednesday, even beating the technology indices that were also up strongly.
Match Group benefited after the release of strong results from competitor Bumble (BMBL 2.45%), which reported fourth-quarter results last night. On the back of a strong 2022 post-COVID outlook, some Wall Street analysts upgraded not only Bumble but also Match.
So what
Last night, Bumble reported 25.7% revenue growth and adjusted (non-GAAP) earnings per share of $0.02. While solid, those numbers actually fell a bit short of consensus. Likely, the omicron COVID-19 wave depressed demand for Bumble's app in Q4.
So why did Bumble soar? Likely, that was due to management's guidance for revenue growth of 34% to 36% over the upcoming year, which would obviously be a big acceleration over Q4's growth.
When you think about it, this makes sense as the omicron wave recedes. Many believe that the highly contagious but less lethal strain of COVID-19 will be the last big wave of COVID before it becomes more endemic than a pandemic. The Federal government is now shifting policies away from containing the spread of COVID and more toward protecting those most vulnerable. In recent weeks, cities and states have begun lifting their mask mandates, even for indoor settings.
The strong post-COVID outlook by Bumble led BMO analyst Daniel Salmon to upgrade not only Bumble but also Match. Salmon raised his rating on Match from "neutral" to "outperform," although he kept his price target at $130, which is still more than 30% higher than today's price, even after Wednesday's run.
Image source: Getty Images.
Now what
Match had only projected 15% to 20% growth for 2022 on its Feb. 1 earnings report, which would actually be a deceleration from the 23% growth it saw in the past year, adjusted for foreign exchange. Disappointed, investors sold off the stock amid that tepid guidance and market turmoil, especially for growth stocks like Match.
However, that was before mask mandates were lifted to the extent they are now, so the cautious guidance may be updated in the next release in May. And with the stock now trading around 30 times 2022 earnings estimates, even after today's bounce, Match is not overly expensive if it can exceed its prior guidance.
For investors who believe inflation fears will recede and wish to play not only a resurgence in the beaten-down technology sector but also the continued reopening of the economy, Match looks like a solid pick that encompasses both themes.
