The once-hot world of mobile dating applications has cooled recently. Bumble Inc. (NASDAQ:BMBL) has felt the pinch. Declining user engagement and revenue have resulted in workforce layoffs and executive changes and depressed the stock, which is down over 43% in the past year. However, amidst these challenges, a spark of hope could ignite the deeply discounted stock and rekindle value investor’s romance with this dating app company.
Dating App Appeal
Bumble is a player in the world of online dating and social networking. It offers its services globally through phone-based applications like Bumble and Badoo.
The mobile dating application market has encountered several obstacles, including a declining user base and flattening average revenue per user (ARPU), which signal a potential unwillingness among consumers to spend money on such platforms.
The company’s struggles have compelled it to lay off 350 employees (roughly a third of the workforce) and overhaul leadership by replacing the founder, Whitney Wolfe Herd, with the former CEO of Slack, Lidiane Jones. She has been tapped to execute a strategic revamp to re-energize Bumble’s user base and stabilize the company’s financial performance.
Recent Financial Results
Bumble’s difficulties were displayed in its lackluster Q4 earnings report that lagged analyst expectations. The fourth quarter results showed a loss of $0.19 per share compared to anticipated earnings of $0.12 per share. The average revenue per paying user declined slightly.
Despite these setbacks, Bumble did see an improvement from the prior year’s loss of $0.85 per share, with total revenues increasing 13.2% year-over-year to $273.6 million. Also, a 95% reduction in the net loss from FY 2022 provides a glimmer of positive light.
Future revenue is forecast to grow 8.7% annually over the next three years as the company reduces the size of its workforce, centralizes mission-critical teams, and focuses on innovation and its go-to-market strategy.
BMBL Stock’s Technical Analysis and Valuation
BMBL stock has declined sharply in the last year. At $11.19, BMBL is trading toward the bottom of its 52-week range of $10.52-$21.06. It continues to show negative price momentum, trading below its 20-day (12.10) and 50-day (13.05) moving averages.
With the price drop, the stock trades at a deep discount based on relative metrics. Its P/S ratio (1.7x) sits well below the Technology sector (4.6x) and Software-Application industry (7.0x) averages. Its EV/EBITDA ratio of 19.56x is also way below the company’s historical average of 36.29x and the industry average of 32.80x and marks the lowest such valuation point for the company.
The stock’s Relative Strength Index (RSI 14) reading of 32.03 suggests it is heading into oversold territory. The price can continue to decline (the company could go out of business). Still, if management can stabilize the company, the current deep value could be an attractive entry point.
What is the Price Target for BMBL in 2024?
Analysts covering BMBL stock have been cautiously optimistic. For instance, J.P. Morgan analyst Cory Carpenter recently reiterated a Buy rating on the stock but lowered the price target to $17 from $20, citing the significant potential for recovery and growth. He argues that the proposed cost-cutting measures and Bumble’s current valuation make the stock an attractive investment opportunity.
The stock currently scores a Moderate Buy consensus rating based on an aggregation of 18 analysts’ stock ratings in the past three months. Their average BMBL price target of $15.94 represents an upside potential of 42.45% from current levels.
The Big Picture
Bumble is grappling with challenges – disappointing financial results and a declining ARPU have cast a shadow over the company, and the stock has significantly declined. Nonetheless, measures such as workforce reduction and a leadership revamp underline a strategic shift aimed at bolstering financial stability.
Bumble’s currently undervalued stock shows potential for future recovery and growth, indicating that this may be an opportune moment for the patient investor seeking long-term value.
