BMBL
🔄 Bumble is undergoing a strategic reinvention, focusing on quality over quantity by purging bots and enhancing user experience, even if it means short-term user count dips.
💰 The company is implementing significant cost discipline, with identified opex and marketing expense reductions, aiming for improved profitability and a leaner operational model.
📈 Despite a recent stock surge, valuation analysis suggests a potential price target near $8, driven by projected EBITDA growth and conservative multiples, indicating further upside.
@bernardodegarcia:
“Ladies and gentlemen, however we look at it, the world of online dating is dynamic, and one of its key players, Bumble, has recently been in the spotlight after reporting its latest quarterly results. What interests us most is that, despite a key profit metric coming in slightly below expectations, the market reacted very positively, with the stock rising, as we’re seeing, a little over 19%. What’s behind this reaction? What could Bumble’s target price reach? Are we still in time to buy Bumble shares? It seems it’s not just about the figures, but about a new strategic direction and the return of its former CEO, also a founder, who is back at the helm. Bumble reported revenues of $247.1 million, slightly exceeding estimates of $246 million, though below the first quarter of last year. They maintained a very solid EBITDA margin of 26%. While earnings per share were slightly below expectations, the markets applauded the outperformance of the main revenue figure. The positive reaction, with the stock up over 19% after these quarterly results, suggests the market is seeing something beyond these exact revenue and profit figures. This ‘something more’ seems strongly linked to both the return of its CEO and founder, Whitney Wolfe Herd, to the leadership role and a somewhat renewed vision for the company. The new strategy under Ms. Wolfe Herd will focus on quality over simple scale or growth at any cost. This implies an aggressive purge of bots and scammers from the platform to create a more verified and trustworthy community. In the short term, this will mean fewer paying users as fake accounts are eliminated and registration becomes more stringent. However, the expectation is that, in the long term, this will lead to a much better experience for real users, fostering retention and attracting higher-quality users. AI also plays a crucial role; Bumble has modernized its matching algorithm using AI, reporting improved connection relevance. Looking ahead, they plan to launch a coaching center combining human guidance with AI assistance. Beyond product improvement, the company is focused on cost discipline. They’ve identified $15 million in operating expense cuts so far. In the second quarter, they are cutting up to $20 million in marketing expenses, seeking to rely more on organic growth and word-of-mouth. This cost-cutting is exactly what was desired. Financially, the company shows strength in its cash position, generating $43 million in operating cash flow this quarter and ending with $202 million in cash on its balance sheets. They repurchased nearly $29 million in shares in the first quarter and still have $50 million authorized for future buybacks, which is about 9% of the current market cap. Prospects for the second quarter also reflect considerable optimism. They project revenues between $235 and $243 million. Most notably, they expect the EBITDA margin to increase to around 34%, up from 26%, despite the intentional reduction in marketing spend. This suggests the company believes it can improve profitability while undertaking this significant product overhaul—a win-win: earn more, spend less. For valuation, if we take the projected EBITDA, which is guided between $79 and $84 million for Q2, we can annualize this to approximately $326 million for 2025. Applying a conservative valuation multiple of five times EBITDA—which is very low for a company not necessarily shrinking but improving margins and EBITDA—gives an enterprise value of about $1.63 billion. Subtracting net debt of around $414 million, we arrive at a market capitalization of approximately $1.216 billion. Dividing this by the roughly 153 million shares outstanding, we get an approximate stock value of $7.93 per share. This isn’t a guarantee it will reach $7.93, but it’s the value derived from a very cheap multiple. If the management team continues to execute its plan, the stock could be valued near $8. So, despite already having risen significantly, it could potentially climb another 50%.”
Watch the exact part of the video where @bernardodegarcia talks about Bumble Inc. here:
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