Keybanc analyst Justin Patterson upgraded Bumble Inc (NASDAQ:BMBL) from Sector Weight to Overweight and a $27 price target.

The re-rating reflected positive revisions to Patterson's EBITDA forecast. 

Patterson's Key First Look (KFL) credit and debit card data and app downloads reflected that both Match Group, Inc's (NASDAQ:MTCH) Tinder business and Bumble exited 2022 with solid payer trends. 

The data suggested that companies were likely to report results aligned with the analyst and Street estimates. Coupled with product initiatives and FX headwinds that moderate in 2Q23E, the analyst believes both Match and Bumble will likely have a solid 2023E. 

Overall customer growth for Bumble and Tinder improved materially above 3Q levels. 

As both Match and Bumble called out during the respective 3Q earnings calls, ARPU growth materially declined for all brands in 4Q due to macro weakness impacting IAP revenues and adoption of premium subscription tiers. 

Despite overall growth declines in 4Q, ARPU growth improved M/M for all brands in December as comps began to ease.

Tinder remains the leader in U.S. Apple Inc (NASDAQ:AAPL) iOS rankings and overall monthly downloads; however, Bumble and Hinge have managed to close the gap.

Patterson believes stable KFL indexed spend growth and lack of significant change in app data during 4Q supports estimates of moderate growth deceleration for Tinder, Bumble, and Hinge. 

The analyst observed that Bumble continues to fare well in Key First Look (KFL) credit card data and app downloads. For December, Patterson observed a 12-point acceleration in indexed customer growth (analogous to Bumble's payer growth), contributing to another month of 20%+ indexed spending growth.

The analyst inferred that competition has not meaningfully intensified and macro headwinds moderated (ARPU improved M/M across dating apps in the analyst's data).

The core Bumble app can sustain 20%+ annual revenue growth, according to the analyst. Bumble's valuation appears attractive at 12.4x 2024E EV/EBITDA for a high-teens to 20% grower with margin expansion. By comparison, competitor Match traded at 20-25x during its monetization ramp. 

With the change in interest rates, the analyst believes the growth and margin profile warrants a mid-teens EBITDA multiple.

Price Action: BMBL shares traded higher by 4.24% at $20.91 on the last check Tuesday.