The Bumble share price jumped on IPO. Should I invest in this popular US stock?

As the Bumble share price soars, Kirsteen Mackay looks at whether this popular dating app and US Stock could be a lucrative long-term investment.

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The Bumble (NASDAQ:BMBL) initial public offering (IPO) generated considerable buzz on February 11 when it debuted on the NASDAQ stock exchange in New York. That’s because it brought with it the world’s youngest ever female CEO to take a company public. And the Bumble share price soared, opening publicly at $76, after debuting at $43 the day before. This gave it a market cap valuation of $13bn (£9.4bn). Bumble’s share price peaked at $79, but has since fallen below $72. So does this US stock look like something I should consider investing in?

Should I invest in Bumble stock?

Bumble is a social networking platform that consists of a dating app, business networking arm (Bumble Bizz) and space to make friendships (Bumble BFF). The company also owns dating app Badoo and UK gay dating app Chappy through a recent acquisition.

There are a few things I look for in a company before buying shares as a long-term investment. Leadership is one of those, along with a competitive edge and room for growth.

I’m impressed by the leadership publicly presented by Bumble CEO Whitney Wolfe Herd and her team. I think it’s always good to see strong leadership and a sense of true ownership of a company. And it seems to me that the 31-year-old founder clearly represents this attitude.

I also think it’s important to understand a business model if I’m going to invest in it. While I understand what Bumble is, I don’t know that it’s got enough of a distinctive difference from its competition. It’s got the dating app, which is unique in that “women make the first move”. This is designed to encourage a safe and respectful dating experience devoid of abuse and intimidation. It’s certainly a welcome change from some of the seedier offerings available. However, is it enough to maintain its edge?

Highly competitive space

The dating space is evergreen because there are always people looking for love. Therefore, it can hold up well in a recession. However, it’s quite saturated and I get the impression users are easily bored, jumping from one app to another with ease. I don’t think it would take much for a new contender to arrive on the scene and steal its thunder. Especially considering how far Bumble has come in just seven years.

Match Group is Bumble’s chief competitor, but I find it concerning that the two companies have been involved in legal tangles in the past. Hopefully that’s behind them now, but management in these high-profile firms seems to comprise a fairly small pool of people. Burning bridges between them so early on, may not bode well for the future.

Those added extras, being able to network and socialise in a platonic way, mean Bumble might keep users for a lot longer than competitors that only offer the dating option. However, those features are arguably in competition with Microsoft-owned LinkedIn and Facebook.

I like the story behind the business and can see room for growth. But its early days, and for now, I’m not tempted to invest in Bumble shares. I’ll keep it on my watch list and see how it goes.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Facebook, Match Group, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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