On Monday, Goldman Sachs (NYSE:GS) initiated coverage on Grindr (NYSE: NYSE:GRND) stock, the online dating platform catering to the LGBTQ+ community. The firm issued a Buy rating and set a 12-month price target of $20.00 for the company's shares.
Currently trading at $15.74, the stock has demonstrated remarkable strength with a 93% return over the past year. According to InvestingPro, the company is currently trading near its 52-week high of $16.31.
Grindr, known for its service to the LGBTQ+ community, boasts 14.6 million monthly active users globally as of Q3 2024. With a market capitalization of $2.78 billion and impressive revenue growth of 31.79% in the last twelve months, coupled with a robust gross margin of 74.36%, the company has shown strong operational execution.
Goldman Sachs' analysis of Grindr's business model centered on three pivotal questions: the size of Grindr's addressable market, the company's potential to achieve a 20% or higher compound annual growth rate (CAGR) in revenue from 2024 to 2029, and its ability to continue gaining cost leverage in the forthcoming years.
The $20.00 price target set by Goldman Sachs is derived from a combination of valuation methodologies. The first is the enterprise value to GAAP EBITDA (earnings before interest, taxes, depreciation, and amortization) applied to their next twelve months (NTM) plus one year estimates.
The second is a modified discounted cash flow (DCF) analysis using an enterprise value to free cash flow minus stock-based compensation (EV/FCF-SBC) multiple, applied to their NTM plus four years estimates and discounted back three years.
The analyst provided a perspective on Grindr's financial outlook, stating, "We initiate coverage of Grindr Inc. (GRND) with a Buy rating and a $20, 12-month PT and a 3:1 risk reward skew." The firm's price target reflects an equal weighting of these two valuation approaches.
Goldman Sachs' initiation of coverage provides a positive outlook for Grindr, with a focus on the company's growth prospects and market potential.
The firm's assessment presents a constructive view on the stock, suggesting confidence in Grindr's strategic positioning within its niche market. Analyst targets now range from $18 to $21, reflecting broad optimism about the company's trajectory.
For deeper insights into Grindr's valuation and growth metrics, InvestingPro subscribers can access 12 additional ProTips and a comprehensive Pro Research Report, offering detailed analysis of the company's financial health and market position.
DISCLAIMER: James Lu is the Chairman of Grindr Inc. and owner of Investing.com.
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