All of the most basic and essential social interactions were shifting toward the internet long before COVID-19 made this a mandatory move — From Skype and FaceTime to dating apps galore, people have been looking for ways to connect with new and old friends (and potential dates) for years now.
Of course, these tried and true technologies only grew more popular during the time of lockdowns and quarantines, resulting in plenty of increased revenue for those brands and making some of them very serious investment opportunities for retail investors and traders. Take Bumble, for example.
How Bumble Is Different From Other Dating Apps
Bumble is a dating app that sets out to challenge the traditional norms of dating — whether that be in-person or online dating — by only allowing females to reach out to their male matches first. Dating apps and websites have long been plagued by unwanted or outright tasteless advances towards women, making Bumble a big hit for those who might not have otherwise used a dating app.
Since its inception in 2014, Bumble has morphed from strictly a dating app to an app that allows people to meet potential dates, find new friends, and network for business opportunities.
Founded by a former Tinder employee, Bumble has gone from an underdog to a serious contender for top dating app — as of January 2021, the app had over 42 million active monthly users, making them the second-most popular dating app after Tinder in America.
Bumble Earnings Forecasts Beat Expectations
Thanks to the increased popularity of these apps during COVID-19, Bumble’s revenue increased exponentially in 2020 compared to past years.
Today, its latest quarterly numbers continue to triumph over last year’s numbers (and the years before), making Bumble’s continued success look more and more likely.
In its first quarterly report back in March of 2021, it logged over $165 million in revenue, which far exceeded analysts’ forecasts and revenues of quarters past. Then, come May of 2021, Bumble did it again: Analysts predicted earnings of $165 million, and they reported nearly $171 million.
Looking forward, Bumble is forecasted to bring in anywhere from $175 to $178 million in their next quarter.
Only time will tell if they exceed forecasts once more, but with its continued success in the dating game, it doesn’t seem like a far-fetched idea in the slightest. This is because it continues to add new users by the day, many of which are paid users who shell out a little extra to boost their profile on other users’ pages.
Risks of Buying Bumble Stock
There are always risks involved with investing, even with companies like Bumble that seem so promising on paper. Most glaring of all risks with Bumble is the fact that its shares have failed to exceed the price point they hit their first week on the New York Stock Exchange.
Ever since its peak on February 16th of 2021, Bumble’s price per share has dropped from nearly $79 to just over $47. There’s a chance that Bumble’s price per share could just continue to drop, even in spite of continued earnings beyond what’s forecasted.
Then, there’s also the risk that Bumble could drop in popularity (and, as a result, drop significantly in revenue and active users) as more and more people get comfortable with going out and socializing in large groups once more.
While dating apps were popular before COVID-19, of course, they face the threat of decreased use as people grow more excited to give the dating apps a rest for a bit and pursue in-person matchmaking efforts instead.
Bumble also faces the threat of being bested by competition. The world of dating apps and services is a highly competitive one, and Bumble not only faces the challenge of competing with Tinder, but also all the up-and-coming apps like Hinge or Once that threaten to take Bumble’s spot as the next great dating app.
Not to mention, Bumble is hundreds of millions of dollars in debt, and it can only pay this off if it continues to perform well. If revenue dips, then the debt will remain for longer.
Is Bumble Valuation Fair?
When Bumble went public in February of 2021, its initial valuation was set at $2.2 billion. Since then, Bumble’s stock has continued to drop and its valuation has been adjusted to more than half of that at $1 billion.
Plenty of experts argue that this billion-dollar valuation is still too high. With Tinder’s valuation set at $10 billion, this $1-billion valuation seems quite paltry — however, Bumble just doesn’t have the experience that Tinder has in the world of dating apps.
This makes that $1 billion seem a lot more reasonable. Any lower, and the stock would be arguably quite undervalued. Indeed a discounted cash flow forecasts suggests the share price has upside to $61 per share.
Is Bumble Stock A Buy? The Bottom Line
Bumble’s stock currently resides around 30% below fair value. While this is undoubtedly an improvement over the low point of $39 they reached back in May of 2021, it’s still not steadily rising at quite the rate one would expect of a company with such enormous revenue growth (and still nowhere near that $79 price point they hit at their peak back in February).
Bumble’s share price continues to look like a bumpy ride, decreasing in value almost as soon as it increases in price. Because the company is so newly public and so much is still unknown about Bumble’s Wall Street performance tendencies, it seems fair to say that Bumble is not a buy at this time.
It’s best to hold off on investing until they’ve proven themselves a little more so that any and all potential losses can be avoided.
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.