Last March, Bumble Inc. (NASDAQ:BMBL) fell to an all-time low of $15.41. Five months later, it was up 155% to $39.33. The popular dating app was adding users left and right and generating strong revenue growth in the process.
Fast forward to March 2023 and Bumble stock is trading below $20, its lowest level in 10 months. Wide market weakness and less attractive growth metrics have many investors thinking it’s time to look at other growth names.
But with Grand View Research projecting the North American online dating app market will grow 7.6% annually for the rest of the decade, Bumble’s latest stumble could be one opportunity.
The stock looks even more intriguing given that growth outside North America is likely to be stronger. As high-speed internet and smartphones become more accessible in developing economies, online subscriptions and advertising spending should explode. Places like China, India and Brazil therefore represent the next wave of growth for dating app providers.
Of course, given the opportunities for growth, there is no shortage of players clamoring for a piece of the action. Match Group, eHarmony and others have long positioned themselves for overseas expansion. However, Bumble’s unique woman-centric focus and quirky fruit metaphors could provide a competitive advantage.
What did Bumble’s finances look like in 2022?
Bumble grew revenue 19% to $903.5 million in 2022. Excluding the impact of currency movements, top-line growth would have been 24%. More importantly, Bumble’s core App business, which accounted for 77% of revenue, grew 31%. That fell short of management’s forecast of 35% growth, but offset weakness in Badoo’s apps and others segment, where revenue declined 10% from 2021.
The key to the company user metrics also experienced growth. Total paid users increased 10% to 3.2 million and average revenue per paid user (ARPPU) increased 7% to $23.05. However, with user growth projected at 15.5% in 2021, concerns about waning interest in the platform sent Bumble shares down 38% last year.
Another factor in the stock’s decline was a shift in profitability. Bumble posted a net loss of $114.1 million in 2022 after posting a profit of $281.7 million the previous year. While operating expenses did increase, the main driver was the absence of an income tax benefit received in 2021. Looking ahead, year-on-year comparisons in the income statement should be more favorable .
The health of the closing balance sheet is also encouraging. The cash position increased to $402.6 million and long-term debt decreased to $619.2 million. More work is needed to deleverage the balance sheet, but things are moving in the right direction.
What is Bumble’s growth outlook?
Another sign of positive momentum is that global bumble.com website traffic reached a record 12.8 million in January 2023. This likely includes a New Year’s resolution effect, but nonetheless reflects the brand strength. Still, the company needs to find other avenues for growth outside of Bumble Date, and management is well aware of that.
Bumble BFF for friendship and a LinkedIn-style Bumble Bizz for professional networking have been added to the Bumble lineup. Last year, Bumble acquired the freemium Gen Z dating app Fruitz, which is very popular in Europe and Canada. The company hopes to replicate the app’s strong user growth in the US and other markets.
Along with product innovation, international expansion is a major tenant of Bumble’s growth strategy. While improving the user experience in the domestic market, it plans to focus on Latin America, Southeast Asia and the EMEA regions for growth over several years.
Management expects revenue growth of 16% to 19% this year, half of which is a slowdown from 2022. The potential for a positive surprise it could come from successful overseas expansion and Fruitz’s traction in the United States.
Is Bumble Stock a good investment?
Which precipitated Bumble’s recent slide is a secondary offering of 13.75 million shares that was announced on March 3rd. The stock was priced at $22.80, which was lower than what the stock was trading at the time. While the capital increase is intended to support long-term growth, the dilution was reason enough for some shareholders to slide to the left.
The good news is that the stock retook the 250-day support level of $18.81. Combined with several technical indicators (RSI, Bollinger Band) approaching oversold territory, the downside looks limited from here.
And with Bumble it’s expected to come back profitability in 2023, Wall Street is mostly bullish. Since the company’s fourth-quarter report in late February, nine analysts have rated the stock a buy versus four holds. The group’s average price target is $28, which equates to more than 40% upside over the next 12 months.
In the coming quarters, Bumble will need to demonstrate that growth initiatives are working to win back investors. If history repeats itself, there will be a second date.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
FAIR-USE COPYRIGHT DISCLAIMER
Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for “fair use” for purposes such as citation, syndication, criticism, commenting, news reporting, teaching, scholarship, and research. Fair use is a use permitted by the copyright statute that might otherwise be infringing. Non-profit, educational, or personal use tips the balance in favor of fair use.
-This article has no negative impact on the original works (It would actually be positive for them).
-This article is also for teaching and inspirational purposes.
– It is not transformative in nature
Source link