What happened
Shares of Grindr (GRND 3.45%) popped as much as 13.8% this week, according to data provided by S&P Global Market Intelligence. The LGBTQ dating app company grew its revenue at an impressive rate in the second quarter and raised its full-year 2023 guidance. However, the stock is still down 50% from when it went public through a special purpose acquisition company in 2022.
So what
In the second quarter of 2023, Grindr's revenue grew 32% year over year to $61.5 million. This strong growth was driven by monthly active users growing 8% year over year to 13.1 million, an increase in its paying user penetration to 7.1%, and an increase in average revenue per user. These are the core drivers of any dating app (total users, paying users, and money spent per paying user). Grindr is succeeding with all three at the moment.
This strong growth has come with impressive profitability as well. Grindr posted an impressive 44% adjusted EBITDA margin (earnings before interest, taxes, deprecation, and amortization) in the quarter, which equates to $27 million in adjusted earnings. Investors were likely impressed with Grindr's combination of revenue growth and profitability, a feature that few early-stage internet companies can boast.
For the full year, Grindr raised its guidance for revenue to grow 28% year over year and adjusted EBITDA margin to come in at 41%. This would equate to $250 million in revenue and over $100 million in adjusted earnings this year.
Now what
Even after this week's pop, Grindr stock trades at a market cap of just $900 million. This puts the stock at a forward adjusted price-to-earnings ratio of under 10 if it can hit its revenue growth and margin guidance.
Industry analysts have overall dating app spending steadily growing this decade, which should present a tailwind for Grindr. As the leading app in its niche (LGBTQ daters), today could present a buying opportunity due to this low forward earnings ratio. Of course, you need to believe the analyst projections that dating apps will grow and Grindr's own estimates, but the company has put up impressive results so far. Along with Match Group and Bumble, Grindr could be a third stock to add to your portfolio if you want exposure to the online dating tailwind.