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Shares of dating platform Grindr gained 213% on November 18 after the company went public on the bourses via a SPAC (special purpose acquisition company) merger. Grindr is an LGBTQ dating app that began trading on the NYSE at a price of $16.90 per share. It touched a record high of $71.51 and ended at $36.50 when markets closed.
The ticker for Grindr is GRND and company CEO George Arison stated, “It’s a pretty incredible thing that the company whose primary user base is gay and bisexual men, built by and for the LGBTQ population, with an employee base that is heavy in that cohort of the population as well, is now going public. It’s not something that would not have happened 20 years ago, probably wouldn’t have happened even 10 years ago.”
The excitement surrounding the company came as a surprise, as investor sentiment has remained quite bearish in 2022. For instance, dating applications such as Bumble (NASDAQ: BMBL) and Match (NASDAQ: MTCH) are down 32% and 65%, respectively, year to date.
Arison emphasized Grindr will differentiate itself from peers as it aims to build a community-based social network for LGBTQs.
Let’s look at Grindr’s key metrics and if investors should be excited about the stock right now.
Grindr stock price and revenue trends
The stock price of a company is directly tied to its revenue and earnings. Grindr has increased sales from $66 million in 2017 to $147 million in 2021. Comparatively, its adjusted EBITDA has risen from $11 million to $77 million in this period. In the first six months of 2022, revenue rose 42% to $90 million, while a challenging macro-environment meant its EBITDA could expand by “just” 26% to $42 million.
With 11 million monthly active users and 765,000 paying users, Grindr is available in more than 190 countries. The average daily time spent on the app is 61 minutes, while 80% of its user base is below the age of 35.
The company expects its total addressable market to touch a staggering $14 trillion by 2026, which encompasses verticals such as travel, health & wellness, and entertainment for the LGBTQ community.
We can see that Grindr is a highly profitable business and is quite early in its monetization journey. With attractive user demographics and a rapidly expanding market, it has established itself as a market leader in the LGBTQ space.
In the first half of 2022, Grindr spent just 1% of its revenue on marketing, allowing it to end the period with an EBITDA margin of 46%.
It will soon be expanding product features on the app to include premium add-ons, subscription-based pricing optimization, and product adjacencies which should expand its base of paid subscribers. Right now, paid user penetration is quite low at 6%. Comparatively, Bumble and Tinder have higher penetration rates of 9% and 18%, respectively.
Is GRND stock a buy or a sell?
In its press release, Grindr explained the combined entity would have a post-transaction enterprise value of $2.1 billion. The cash proceeds it raised consist of $284 million of cash in trust and another $100 million in cash equity from a forward purchase agreement.
The net proceeds of the transaction will be used to satisfy debt obligations, and fund planned growth initiatives.
According to data from Trading View, the company is valued at a market cap of $1.1 billion. So, if Grindr ends the year with sales of $180 million and adjusted EBITDA of $84 million, GRND stock is priced at 6.1x forward sales and 13x forward EBITDA, which is not too steep for a profitable growth stock.
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