The Bumble app
Photographer: Jaap Arriens / NurPhoto via Getty Images
Photographer: Jaap Arriens / NurPhoto via Getty Images
Bumble Inc. started trading at a time when the market is at a fever.
Less than a few weeks ago the mania was over GameStop Corp. and other “meme” stocks such as AMC Entertainment Holdings Inc. enchanted the world. A horde of traders who rallied on Reddit’s WallStreetBets forum raised share prices, which later tumbled just as dramatically. The rollercoaster followed a banner year for the stock market as a whole, and especially the first public offerings.
Should You Buy Bumble Now? Shares of the company – which runs a matchmaking app where women take the first step – were traded on the Nasdaq Stock Exchange at about $ 77 in New York on Thursday, about 80% higher than the IPO price of $ 43.
Food delivery company DoorDash rose 86% on its first trading day in December, and a day later, Airbnb more than doubled in its debut. Altogether, the first day of meetings was almost three times larger in 2020 than the average of the last 40 years. Shyam Patil, analyst at Susquehanna International Group, said last week he expects Bumble’s share of its IPO price to rise.
For retail investors curious about Bumble, here’s our guide to how the company fared and what to keep in mind when considering the stock as part of your portfolio.
How about the company?
Whitney Wolfe Herd, who co-founded Tinder, introduced Bumble in 2014 as a way to change the power dynamics of dating for women. The app enables women to take the first step by sending potential dates. After that, it added features like Bumble BFF and Bumble Biz, which introduced new friends and business contacts respectively.
Also read: Bumble’s 31-year-old CEO becomes rare female billionaire
Bumble, based in Texas, now operates in more than 150 states and has grown rapidly over the past few years. SensorTower estimates that the company, along with Badoo, Bumble’s European brand, has amassed approximately 54 million users per month. According to Bloomberg Intelligence, this is the second place of the 100 million million Tinder operator Match Group Inc. Bumble posted a net loss of $ 84.1 million in the period from January 29 to September 30 last year, after generating a total revenue of $ 376.6 million. according to a regulatory submission.
The Covid-19 pandemic has curtailed most personal appointments. With home stay orders in place, the the online dating market has grown as people continue to look for connections in the digital realm. Yet it is unclear whether those seeking love will stay online after the pandemic. And then there is the question of whether people are willing to pay for dating apps – and whether the businesses can grow into a competitive market.
What is the case to buy?
If you see room for growth. The company’s sales could expand by 20% by 2023, given the huge opportunity in the online dating space, according to Bloomberg Intelligence analyst Matthew Martino. While the Ebitda margin – the ratio of earnings before interest, tax, depreciation and amortization to total revenue – at more than 20% is close to the Group Group’s 38%, it is still higher than the recent exchange rate by DoorDash and Airbnb. Bumble’s IPO price of $ 43 also implies a valuation of about $ 9 billion and a pre-sale price of 12-13x, which is a 20% discount on Match Group’s 16x, Bloomberg Intelligence estimates.
If you see a competitive advantage. Bumble’s “woman-first” approach helps to differentiate it in a market saturated with copies. (Who does not sweep left or right these days?) This can help ward off competition.
‘They made the successful bet that the men would follow where women are. And women will go where they feel comfortable and empowered, ”says Jeremy Abelson, founder and portfolio manager of Irving Investors, which participates in the IPO.
If you think the pandemic has made digital dating permanently more common. The online dating world has become one of the only ways people could seek connections during Covid-19 connections. It is still unclear how far we are from the end of the pandemic. An issue for the purchase of Bumble is when you consider that daters – who have adopted new standards – will maintain the digital first habit, even after Covid.
If you like scale. In the online dating business, scale is the key to success. More people on an app enhances the experience for everyone and offers new games. This could eventually lead to more people joining. Users of online dating also show a preference for maintaining multiple dating profiles, which should help Bumble grow further.
If you believe Bumble can go beyond dates. Bumble BFF could be a long-term opportunity for the company to expand even more. According to data from Bloomberg Intelligence, the monthly users of the app-friend feature reached 9% of Bumble’s total. Positive growth of the friendship app, Ablo from Match Group, could also be a good sign of future appetite for platonic connection.
… and what are the reasons for being clear?
If you think IPOs are not too risky. It can be tempting to invest in a company that’s on your radar, especially if you’ve been following the evolution of Bumble since its inception. However, when Uber and Lyft made an investment a few years ago, there was a lot of investor noise. Lyft is still well below its IPO price two years later and Uber was in the same position until the pandemic hit.
“While it’s tempting to tackle something exciting for a name you know or use in your daily life, it does not necessarily mean it is a good investment,” said Ryan Frailich, founder of Deliberate Finances. “It can really cloud people’s thinking about it.”
If you do not believe that people pay for dating apps. Bumble’s future financial success will depend on its ability to convert free users into paying subscribers. People prefer to use multiple services, which makes it less likely that they will connect to one paid account. Those who are just looking for informal dates may also not be willing to leave with cash.
If you are afraid of new entrants. Online dating is a competitive industry, with the constant threat that new entrants offer unique features. Facebook recently signed up with Facebook Dating and could potentially use its resources to expand faster than Bumble could do. The popularity of dating apps can often be by region and new competitors can benefit from this, Bumble noted in a submission.
If you are more concerned about the digital dating sector. Match Group, which has the largest share in the market, Wall Street disappointed earlier this month with its projected revenue for 2021 between $ 2.75 billion and $ 2.85 billion. Analysts have estimated $ 2.84 billion. This shows that economic reopening may not be good for online dating.
And finally, experts warn that IPO investments are not designed for individual traders. In fact – in a theme that may sound familiar to anyone who casts a random page on the WallStreetBets forum – the system benefits institutional investors. Banks, pension funds and investment firms are able to acquire shares before retail even starts, enabling them to take advantage of the stock.
Small investors were “absolutely” disadvantaged during a scholarship, according to Michelle Lowry, a professor of finance at Drexel University, who studied the role of institutional and individual investors in public offerings. Large banks that endorse offers retain significant control over the process. And companies that are themselves in the public eye have a strong interest in institutional investors – who tend to play in the long run – to buy up their shares.
– With help by Matthew Martino