Grindr is 'under-monetizing' its user base: Analyst

Grindr (GRND) has grabbed the attention of Wall Street as Citizens JMP Securities initiated coverage of the stock, giving it a Market Outperform rating with a price target of $14 per share. Grindr CEO George Arison spoke to Yahoo Finance in March about his plans to expand the business beyond dating for potential growth.

Citizens JMP Equity Research Analyst Nick Jones joins Market Domination to discuss Grindr's potential and what it could look like moving forward.

Jones affirms Grindr's potential: "Their profit margins are industry-leading. They're under-monetizing their user base. If you think about monthly active users on a dating app, often about 15% of those are converted into paying users. For Grindr, they're only at 7% today, so they could double that just at the current user base, let alone their ability to continue to grow their user base in the US and internationally. So we think there's plenty of levers for them to pull, to continue driving revenue growth and being quite profitable."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

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JULIE HYMAN: Dating app, Grindr getting some love from Wall Street with several upbeat coverage initiations in recent days. Among those, Citizens JMP Securities starting out with a market outperform rating on Grindr. For more on what's making this an attractive opportunity, let's get to Nick Jones, Citizen Champ Equity Research Analyst. Nick, it's great to see you. Thanks for being here.

What has been interesting to me in some of these initiations, yours included, is that the grinder customer base seems like it is more perhaps loyal or has more potential than the bigger dating pool, if you will? Can you talk us through your call?

NICK JONES: Yeah. I think that's right. The GLBTQ community and this really this app really focuses on gay men has largely been underserved by mass appeal of dating apps, even if they're casual dating apps. So this app specifically is a place where these folks can find a community that otherwise was difficult to find, whether it was on Meta, on Facebook, or Snapchat or Instagram or TikTok. Over the years, this has kind of been a ubiquitous platform for the GLBTQ community to find each other, connect for dates, and people even stay on here as friends after they've connected on the app. So it's a really compelling brand within the online dating and even to a lesser extent social media landscape.

JOSH LIPTON: And Nick, look at the stock, it's had a nice run. It's up about 70% here over the past 12 months. But you must think valuation still looking attractive here?

NICK JONES: Absolutely. I mean, they are growing revenue. 100% faster than the next closest dating apps. Their profit margins are industry-leading. They are under-monetizing their user base. If you think about monthly active users on a dating app, often about 15% of those get converted into paying users. For Grindr, they're only at 7% today. So they could double that just on the current user base, let alone their ability to continue to grow the user base in the US and internationally. So we think there's plenty of levers for them to pull to continue driving revenue growth and being quite profitable.