Bumble,
the stock, is down almost 40% since Barron’s recommended it last November. Bumble, the company, which operates the dating apps Bumble and Badoo, is doing just fine, however. Therein lies an opportunity for investors.
Bumble (ticker: BMBL) sold off earlier this year after announcing that Blackstone and Whitney Wolfe Herd, the company’s founder and CEO, would both sell shares in a secondary offering. Then, the market was rattled by concerns about weaker user spending on dating apps. In May, the company’s president, Tariq Shaukat, stepped down.
With interest rates rising, investors have found little to like about unprofitable companies like Bumble, and in this case, the string of troubling tidings hasn’t helped. Bumble shares have fallen to a recent $16.52 from a high above $70 on their first day of trading in 2021. The company’s current market capitalization is $2.3 billion.
Blackstone was an early backer of Bumble and still owns 24% of the stock, according to FactSet. Still, the secondary offering, in which Blackstone and Herd sold a combined 13.75 million shares, had a particularly chilling effect. The sale “puts a lid on the stock price for a while,” says Thomas Ricketts, chief investment officer at Evolutionary Tree Capital Management, which also owns Bumble shares.
Blackstone’s remaining stake is an overhang, too, although Ricketts says his fund might buy more Bumble stock when Blackstone’s exit is almost complete. He calls the business “very healthy.”
Bumble’s first-quarter sales of $243 million beat consensus expectations of $241 million. Total paying users in the quarter grew to about 3.5 million, also exceeding estimates. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $59.3 million also beat consensus estimates of $54.8 million. The company lost one cent a share, largely due to a higher-than-expected tax rate. In delivering quarterly results, management reiterated its full-year guidance for revenue growth of 16% to 19%, implying revenue of $1.06 billion at the midpoint of that range.
Bumble has been taking user share in the past few years from
Match Group’s
(MTCH) Tinder app, outgrowing its rival, according to analysts at Evercore.
“We like the company’s increasing focus on payer growth,” RBC analyst Brad Erickson wrote after Bumble’s first-quarter earnings report. He has a $27 price target on the stock, which would represent a 66% gain from recent levels.
Wall Street analysts regard Bumble as a long-term growth story, with sales expected to compound annually at about 19% for the next five years, to just over $2.5 billion, mostly driven by about 15% annual growth in paying users. As the company relies less on marketing, profit margins should increase, pushing Ebitda up by about 23% annually to $761 million by 2028.
That makes the valuation look appealing. Bumble’s enterprise value of $3.7 billion is just under 13 times analyst expectations for forward 12-month Ebitda. That’s down from a midteens multiple some months ago. Internet company
Etsy
(ETSY), by comparison, trades for just under 17 times Ebitda and is expected to grow Ebitda by 25% annually for the next five years.
“Bumble shares offer attractive risk/reward opportunity at current levels,” wrote Evercore analyst Shweta Khajuria, who also has a $27 price target on the shares.
Write to Jacob Sonenshine at [email protected]
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