We came across a bullish thesis on Grindr Inc. (GRND) on Substack by Welfare Capital. In this article, we will summarize the bulls’ thesis on GRND. Grindr Inc. (GRND)’s share was trading at $18.92 as of April 16th. GRND’s trailing P/E was 134.66 according to Yahoo Finance.
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Grindr is an LGBT dating app, that offers significant growth potential as a capital-light, cash-flow-generating business. The company’s target demographic is well-positioned for long-term tailwinds, with increasing adoption within the gay/LGBT community. Grindr’s revenue growth is projected to remain robust, with annual increases of 20-25%, driven by strong operational leverage, efficient operations, and monetization opportunities. Over the long term, Grindr’s margins are expected to expand from 27% to 35-40%, due to its lean workforce and high-growth characteristics. Despite its seemingly high valuation—trading at 10x sales and 30x forward earnings—Grindr’s impressive gross margins of 75% and its strong growth trajectory suggest it may be undervalued compared to many other U.S.-listed companies. Its efficient capital expenditure and low incremental investment requirements make Grindr a sustainable cash flow machine.
The app’s market position is strengthened by its near-monopoly status within its niche. With over 90% brand recognition in the U.S. and 60% internationally, Grindr holds a dominant share of the market. Its entrenched user base is difficult to disrupt, and its management is open to mergers and acquisitions if competitive threats emerge. Grindr’s strong free cash flow generation—$94 million in 2024—supports its ability to acquire competitors and return capital to shareholders. The company has also initiated a $500 million buyback program, signaling a commitment to shareholder value. Although Grindr’s stock price is considered expensive, its growth prospects and efficient operational model make it an attractive investment.
However, the company does face risks, particularly around product mismanagement. If Grindr fails to innovate and improve the app experience, it could lose users to more efficient competitors, damaging its market share and monetization efforts. Moreover, Grindr’s relatively low executive ownership—just 2.3% of the company’s shares—may present governance concerns, particularly with the large controlling shareholders, which could affect the company’s direction or liquidity.
In conclusion, Grindr is a highly attractive investment due to its strong growth potential, efficient operations, and leadership within the gay/LGBT dating app market. With a clean cash flow profile and low capital requirements, Grindr is positioned to generate significant long-term returns, even amidst its relatively high valuation. Investors can expect continued strong performance as the company capitalizes on its dominant market position.
Grindr Inc. (GRND) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held GRND at the end of the fourth quarter which was 21 in the previous quarter. While we acknowledge the risk and potential of GRND as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GRND but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.