Time To Swipe Right on Dating Online?

While Bumble Inc. (NASDAQ:BMBL) has been quite popular among Gen Z, a recent brand refresh campaign faced a lot of backlash. While a product relaunch was supposed to be a springboard to invigorate the decade-old dating app created by Whitney Wolfe Herd, it ended up leading to unwelcome headlines.

Bumble, which has been famous for encouraging women to “make the first move,” modified this feature by letting them lead with a question rather than creating a fresh message every time. The product change was broadly welcomed, but the advertisement campaign did not get much love.

Bumble chose edgier taglines like, “You know full well a vow of celibacy is not the answer.” Chief marketing officer Selby Drummond explains this bold and fun approach as a departure from Bumble’s past more conventional messages, such as “Be the CEO your parents always wanted you to marry.”

As part of the app’s facelift, Bumble focused on tackling the weariness users experienced after several years of swiping. The original goal to empower women by initiating contact had transformed into what new CEO Lidiane Jones termed “a burden to a subset of our customers.”

In spite of the messaging hiccups, Bumble continues to make headway in the online dating world. Bumble Inc. now  includes Bumble, Badoo, and Fruitz for dating, Official for committed relationships, Bumble For Friends, which helps people find new friends, and lastly, Bumble Bizz for making professional connections.

How Is Bumble Positioning Itself for Growth?

In a bold move, Bumble is looking to overhaul its core user experience by launching a new feature called “opening moves” that allows women to establish a prompt or topic to which male suitors must respond to in order to begin chatting.

Contrary to the popular view, Jones views the Bumble redesign as crucial to user satisfaction and growth. “We’re seeing a greater need for authentic human connections,” Jones said. “I don’t anticipate that the number of people using online dating is going to go down, quite the opposite, but there is a higher bar … So we’re taking it as a great call to action to center ourselves on our mission.”

To accelerate growth, Bumble has been quicker to adopt and incorporate generative AI to speed up advancements such as on the dimensions of compatibility and customer’s changing intent as well as trust and safety. Generative AI is also being applied to boost user experiences, such as by providing better customer service.

Another growth vector for Bumble is through acquisition. Management announced a plan to buy Geneva this month.

Geneva is a community application where people can link up with others who have similar interests. The goal is to expand audience reach by serving the needs of people who simply like interacting in group formats and sharing common hobbies.

By integrating hobbies and interests into its app ecosystem, Bumble can set itself apart from rivals by providing a mix of dating, making friends, and community services.

The company’s foray into groups and communities offers the potential to generate more revenues from premium services, as well as advertisements and subscriptions.

There is also the opportunity to promote new features to an existing clientele, who are likely to increase their brand loyalty as well as engagement. The big idea is to round out the company as a full spectrum social network beyond simply online dating.

What Do the Numbers Reveal?

Bumble’s revenue during the first quarter of 2024 rose by 10.2% from last year to reach $267.78 million.

The driving force behind this growth was an increase in paying users that climbed by 18% to reach a total of 2.7 million users.

Income before income taxes came in at $41.35 million, a vast increase from the slight profitability in the year ago quarter.

Net earnings came in at $33.87 million which translates to an earnings per share of $0.19. This contrasted with net losses last year of $2.33 million, corresponding to an EPS loss of $0.01.

How Is Bumble’s Year-Ahead Guidance?

In fiscal 2024’s second quarter, management anticipates total revenues ranging from $269 million to $275 million, indicating an increase in growth rate of around 4% to 6% compared with the same period last year.

The company further expects its Bumble app’s revenue to fall within the range of $218 million and $222 million, indicating an increase between 5% and 7% year-over-year.

Moreover, the top brass believes that Bumble App will experience sequential net adds of about 70,000 to 80,000 in the second quarter. EBITDA is forecast to range from $69 million to $73 million, representing a midpoint increase of 26%.

For the full-year 2024, management is forecasting a growth rate in total Bumble Inc. revenue of between 8% to 11%.

Is Bumble Stock a Buy or Sell?

Bumble stock is not even close to being a sell but rather is a strong buy according to 20 analysts who forecast 49.1% upside to fair value of $14.46 per share.

Over the last three years, Bumble’s revenue increased at a CAGR of 19.3%. EBITDA also grew during this time period, with an average compounded growth rate per year of 9.9%.

If analysts are right, Bumble is likely to climb at a 9.1% pace annually over the next 5 years. So too the company’s EPS has been on an upward trajectory, rising at a CAGR of 26.9%.

Still, Bumble is a mix of pluses and minuses. It’s clear that management has conviction in the stock and believes it’s undervalued as evident by the share buyback plan. So too is it trading at a low price-to-earnings multiple relative to earnings growth that is forecast.

On an absolute basis, though, the price-to-earnings ratio of 54x is clearly elevated so management must deliver the profitability forecast to justify the current valuation. If they do, though, expect the valuation to reflect the upside opportunity over the medium to long-term.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.