Stock Analysis & Ideas

Macro Headwinds Impose a Dark Cloud Over Bumble (NASDAQ:BMBL)

Story Highlights

Fundamentally, the social disruption of the COVID-19 crisis should benefit dating services like Bumble. However, brewing macroeconomic woes impose an underappreciated but significant headwind on BMBL stock.

Following the dark cloud imposed on interpersonal interactions by the COVID-19 disaster, the upside narrative for dating app Bumble (NASDAQ:BMBL) aligns with logical deduction. Humans are social creatures, and the urge to connect should drive dating-related services. However, macroeconomic headwinds present a troubling framework. Therefore, I am bearish on BMBL stock.

At first glance, Bumble should be flying higher based on the pent-up demand thesis. To be sure, BMBL stock currently is doing just that. Since the January opener, shares skyrocketed over 28%, providing much relief for long-embattled stakeholders. As well, a majority of covering analysts carry an optimistic view of the dating and social networking enterprise.

In addition, fears of contracting COVID-19 have gradually faded. This pivotal catalyst and the reopening of the rest of the world economy theoretically augur well for BMBL stock. As people get out more, they not only improve themselves through experiencing different perspectives but also facilitate intriguing photographs and talking points – all compelling stuff when Bumble users desire to meet that special someone.

Still, it’s also fair to point out on the other end of the scale that BMBL stock dipped 15% in the trailing year (despite the aforementioned skyrocketing). Moreover, since its first public trading session, BMBL has given up nearly 66% of its equity value. Frankly, no enterprise loses so much value without a reason.

Interestingly, TipRanks, BMBL stock has a 4 out of 10 Smart Score rating. This supports the fact that the stock is not attractive currently.

BMBL Stock Suffers from Macroeconomic Concerns

Invariably, the market performance of every publicly-traded security since the end of 2021 until now at least partially involves the same entity: the Federal Reserve. Supervising the financial system, the central bank modulates monetary policy to help guide the broader economy. Invariably, then, macroeconomic concerns weigh on BMBL stock as they do any consumer discretionary service.

While not dismissing the top-line component of macroeconomic pressures, Bumble suffers from a downwind concern. Recently, CNBC reported that among a survey of singles, generating less than $30,000 ($29,878 to be exact) represented a dealbreaker.

Under ordinary circumstances, that wouldn’t be a problem for BMBL stock and its ilk. After all, as CNBC reminded its viewers, the median annual salary in the U.S. sat at $37,522. Granted, different regions feature varying average income statistics along with wide ranges of costs of living. Nevertheless, it shouldn’t take much for enterprising individuals to make (considerably) above the median income.

Again, the above discussion focuses on pre-pandemic norms. However, under the present paradigm, making even below the median income may be challenging. As TipRanks reported, several major enterprises announced layoffs, including technology stalwarts. Suddenly, the narrative becomes quite problematic for BMBL stock.

With big tech, the lost opportunities don’t exclusively involve throw-away, come-as-you-are jobs. No, these are high-paying jobs, jobs of which their occupants can make family-building careers. In other words, when the latest round of layoffs involve smart, likely young, and upwardly mobile individuals, that’s going to hurt BMBL stock.

If the CNBC report is to be believed, few will date anybody if their income is zero.

Bumble’s Financials Also Present Concerns

To be fair, the above impact of mass corporate layoffs may take some time to affect BMBL stock. However, what can’t be denied in the here and now is the financials. Frankly, they don’t provide the greatest confidence for prospective investors.

Perhaps most glaringly, the market prices BMBL stock at a forward earnings multiple of 53x. Needless to say, that’s well above the industry median value of about 17.3x.

In terms of valuation, the one positive comes from the price-to-book ratio. Here, the market prices BMBL stock at 2.0 times book value. In contrast, the sector median is 2.6. However, if Bumble encounters problems with its core demographic (young, upwardly mobile users that recently got laid off), it seems doubtful that shareholders will continue to justify the aforementioned rich earnings premium.

Plus, the other concern is that as a young enterprise, Bumble should be blowing up the revenue growth chart. Right now, on a per-share basis, its three-year revenue growth rate sits at 7.2%, which is exactly the sector median. More than likely, this stat needs to be dramatically better than the industry median for BMBL stock to redeem itself.

Is BMBL Stock a Buy, According to Analysts?

Turning to Wall Street, BMBL stock has a Moderate Buy consensus rating based on 10 Buys, five Holds, and zero Sell ratings. The average BMBL stock price target is $25.93, implying 6.9% downside potential.

The Takeaway: Double Headwinds Cloud BMBL Stock

Unfortunately, BMBL stock suffers from a narrative problem and a math problem. Regarding the former, layoffs affecting high-paying jobs may diminish Bumble’s total addressable market. As for the latter, Bumble’s valuation is awfully rich ahead of macroeconomic headwinds that sparked said layoffs.


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