Bumble (NASDAQ:BMBL), the dating app prioritizing women, has seen its stock price stagnate at $8.20 over the past six months, yielding a meager 1.7% return. This performance pales in comparison to the S&P 500’s robust 16.8% gain during the same period. Is BMBL a buy, or are there better investment opportunities? At Hyperloop Capital Insights, we believe a cautious approach to BMBL is warranted.
Table Content:
Three Key Concerns Regarding Bumble’s Investment Potential
Founded by Tinder co-founder Whitney Wolfe Herd, Bumble has established itself as a prominent player in the online dating market. However, several factors suggest potential headwinds for the company.
1. Declining User Spending and Engagement
Average Revenue Per Paying User (ARPPU), a crucial metric for subscription-based businesses, has been on a downward trend for Bumble, experiencing a 2.6% annual decline over the past two years. While increasing paying users can offset this, the long-term viability of Bumble’s business model hinges on maintaining a healthy balance between user growth and ARPPU. A sustained decline in ARPPU raises concerns about user engagement and the platform’s overall value proposition. We will continue to monitor whether attempts to increase monetization negatively impact user growth.
2. Tepid Revenue Growth Projections
Analyst forecasts provide insights into a company’s future prospects. For Bumble, the outlook is less than stellar. Sell-side analysts predict a 3.9% revenue decline in the next 12 months, a stark contrast to the 14.6% annualized growth witnessed over the past three years. This projection suggests potential challenges in maintaining demand for Bumble’s products and services.
3. Stagnant Earnings Per Share (EPS) Growth
Earnings Per Share (EPS) growth indicates a company’s profitability relative to its outstanding shares. Bumble’s EPS has grown at a meager 3.6% compounded annual rate over the past three years, significantly lagging its 14.6% revenue growth. This disparity suggests declining profitability per share as the company expands, raising questions about its operational efficiency.
Conclusion: Exploring Alternative Investment Opportunities
While Bumble is not inherently a poor business, its current performance and future projections do not present a compelling investment thesis. Trading at a forward EV-to-EBITDA multiple of 3.7x ($8.20 per share), Bumble’s valuation appears fair, but the potential upside is limited compared to the downside risk. Hyperloop Capital Insights believes more attractive opportunities exist elsewhere in the market. We encourage investors to explore companies with stronger growth trajectories and more robust fundamentals.
