Once a darling of the tech world, Bumble (NASDAQ:BMBL) experienced a meteoric rise and subsequent fall that could make even the most seasoned investor’s head spin. From its lofty IPO heights in 2021 to today’s bargain-bin price tag, the growth stock’s journey reads like a cautionary tale of Silicon Valley excess.
But could this fallen angel be poised for a phoenix-like resurrection? Let’s peel back the layers of this beleaguered dating app’s story and see if there’s still a spark of romance for potential investors.
Losing charm
The firm burst onto the scene with a revolutionary premise, namely put women in the driver’s seat of online dating. This fresh approach, coupled with savvy marketing that would make Don Draper proud, sent the shares soaring to nearly $80 post-IPO. Fast forward to today, and Bumble’s nose-dived to below $7. For early investors, it’s been less of a honeymoon and more of a bitter divorce.
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So what went wrong? A perfect storm of slowing user growth, cutthroat competition, and a broader economic climate that’s fallen out of love with cash-burning tech unicorns. The latest quarterly results tell a tale of two companies: revenue growth chugging along at 8.1%, but profitability taking a nosedive faster than a bad first date.
Reasons for optimism
Yet, for the eternal optimists out there, the story isn’t all heartbreak and missed connections. The company has finally stumbled into profitability territory. The brand still packs a punch, especially with the ever-desirable younger crowd. With new CEO Lidiane Jones at the helm, fresh from success at Salesforce, there’s hope that Bumble might just find its second wind.
Competition in the form of Tinder looms large, while upstarts like Hinge are stealing hearts left, right and centre. The post-pandemic world has seen healthy dating app usage. But there’s the ever-present challenge of turning free users into paying customers. With 17.6% more users paying for the app’s premium features compared to this time last year, the company’s strategy seems to be working.
Can it recover?
Reigniting user growth, boosting those all-important monetisation metrics, and expanding into new markets are all on the to-do list. And let’s not forget about keeping costs in check.
At its current rock-bottom price, the firm might look tempting for investors with a taste for risk and a long-term outlook. A discounted cash flow (DCF) calculation suggests there could be about 70% growth in the shares before it hits fair value. But make no mistake – this isn’t a firm for the faint of heart or the easily spooked. The world of online dating moves quickly, and Bumble will need to stay on its toes to avoid being left swiping through an empty user base.
For those brave souls willing to consider taking a chance, this growth stock could be the ultimate comeback story. But remember, in the unpredictable world of investing, even the most promising matches can end in disappointment.
For now though, I don’t think there are enough reasons for me to invest. I’ll be swiping left on this one.
