HSBC starts Pinterest, Bumble with Buy, Snap gets Reduce rating
PeskyMonkey
HSBC started coverage on Snap (NYSE:SNAP) with a Reduce rating, Match (NASDAQ:MTCH) with a Hold, and Pinterest (NYSE:PINS) and Bumble (NASDAQ:BMBL) with Buy ratings.
Snap - Reduce rating and a target price of $7.50: The analysts said they believe the growing gulf in content, user engagement, advertising solutions, and financial resources between the leading players and Snap likely precludes a successful turnaround of the business.
According to the analysts, the company has been struggling with an adverse advertising industry climate and a social media landscape which is moving in the direction of the creator driven short-form media content made popular by TikTok, owned by (BDNCE).
They expect revenues to continue to be buffeted (FY23e -3% year-over-year) as advertising budget cuts come at the expense of Tier-2 platforms like Snap; compounded by the growing advantage Big Tech in AI solutions; and with the rise of short-form videos cannibalizing engagement from more lucrative predecessor formats like stories.
The analysts foresee additional pressure on margins on account of higher levels of spend on machine learning and with the expansion of the content creator's revenue sharing program as Snap attempts to capture market share.
Snap has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. The Seeking Alpha authors' average rating is also Hold and so is the average Wall Street analysts' rating.
Pinterest - Buy rating with a $32.10 price target: The analysts think that the company has the right management team in place, a product fit for shopping, and a differentiated capital-light strategy to deliver on its foray into social commerce.
The analysts added that Pinterest's CEO Bill Ready joined last year, with a self-declared mission to integrate shopping into the core platform, move away from competing head on in the short-form videos space, boost operations and margins, and build upon the company's reputation for a positive user environment to better attract advertisers.
Pinterest aims to grow penetration of shoppable pins to include most products on the platform, and the analysts expect revenues to grow (+14% Y/Y FY24e) as the social commerce push gathers steam, helped by Pinterest's recent agreement to outsource the sale of advertising inventory to Amazon.
Match - Hold rating with a $47.10 price target: The dating apps company is working to reboot its portfolio of services to better attract a new generation of users that are looking for more "authenticity" in their experiences, according to the analysts. They expect Hinge will continue to power topline growth but have yet to see proof that Tinder's recent revamp is steering lasting gains beyond those of the one-off price optimisation and given the upcoming Google-Match court case could adversely impact margins.
The analysts noted that Match is currently in litigation with Google (GOOGL) (GOOG) over its practise of accepting alternative payments options for android app users of Tinder, with hearings scheduled for November this year. They estimate that a ruling in favour of Google would cause a 2ppt decline in Match's operating margins.
Bumble - Buy rating with a $20.30 price target: The analysts believe the app, which goes by the company's name, will continue to outperform as it remains relatively underpenetrated and retains a lead in popularity among women, and they expect sizable operational leverage on growing scale.
The analysts expect the company's overall revenues to increase at a 17% 5-year CAGR on growing cultural acceptance of online dating and brand awareness of Bumble app (only 50% of young singles on dating apps in the U.S. report having used the app), along with the erosion of some of Tinder's traditional advantage in affordability after price hikes.
Bumble lags Match in operational efficiencies, with relatively higher sales and administrative cost bases, according to the analysts. They see greater operating leverage driving a 600bp improvement in EBITDA by 2027e. In addition, Bumble is in compliance with Google and Apple's mobile store regulations with no royalty arrears or requirement to increase pay-outs.

More on Bumble, Match, Pinterest and Snap 

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Pinterest: Catalysts For Growth Observed
Match Group: Tinder Payers Net Add Should Start To Turn Positive
Bumble: Attractive Valuation, Difficult Macro
Snap: Infrastructure Costs Are Concerning