On Thursday, Citi maintained a Neutral rating on Bumble Inc. (NASDAQ:BMBL) but increased the stock's price target to $8.00, up from the previous $6.00. The adjustment follows Bumble's third-quarter 2024 results and fourth-quarter guidance, which were considered satisfactory by the firm.
According to Citi, while Bumble has shown some promising early signs from its new marketing strategy and its recent fall product release, it’s still too early to determine the success of these strategic initiatives.
The dating company's fall product release was viewed positively, as it indicates management's commitment to a more regular release schedule. Citi pointed out that although these efforts are in the initial stages, management has made it clear that they will need time to significantly impact the company’s performance. Bumble's management is currently reviewing its revenue strategy, leaving the growth outlook for 2025 unclear.
The firm also expressed caution regarding the potential for margin expansion due to possibly higher investment intensity.
Despite the challenges facing the online dating sector, Citi acknowledged that Bumble's management has begun executing its plans. The firm observed that the reset in the last quarter has reduced the risks associated with investing in Bumble shares, which are currently trading at approximately six times the estimated 2025 EBITDA.
However, Citi concluded that the stock's valuation appears balanced when considering the uncertainties surrounding growth prospects.
In other recent news, Bumble Inc. reported a decline in quarterly revenue for the first time since its initial public offering in 2021. This decrease in sales is attributed to persistent inflation and elevated borrowing costs, impacting consumer spending on the company's app and premium services.
Despite introducing a revamped app and new features to stimulate growth, Bumble's annual revenue outlook was reduced in August, raising questions about the effectiveness of its strategy.
The company's Chief Financial Officer, Anu Subramanian, stated that these investments and initiatives would take time to translate into meaningful revenue growth. Bumble, however, did see an increase in total paying users, rising from 3.8 million in the previous year to 4.3 million in the third quarter. With a slight dip in revenue to $273.6 million for the quarter, the company still surpassed the average analyst estimate of $271.9 million.
Bumble also reported a significant third-quarter loss of $849.3 million and provided guidance that fell short of analyst expectations. For the fourth quarter, Bumble anticipates its revenue to range between $256 million and $262 million, aligning with the average analyst prediction of $260.2 million.
For fiscal year 2024, the company projects revenue to be between $1.06 billion and $1.07 billion, aligning with current estimates.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Bumble's financial position and market performance. Despite Citi's cautious outlook, Bumble's stock has shown significant short-term momentum, with a 20.34% price return over the past month and a 10.31% return in the last week. This recent surge aligns with an InvestingPro Tip suggesting that the stock may be in overbought territory based on its RSI.
From a valuation perspective, Bumble is trading at a P/E ratio of 24.17, which InvestingPro indicates is low relative to its near-term earnings growth potential. This could be an interesting point for investors considering Citi's raised price target and the company's ongoing strategic initiatives.
It's worth noting that while Bumble isn't currently profitable over the last twelve months, analysts predict the company will turn a profit this year. This projection is supported by the company's solid gross profit margin of 70.34% for the last twelve months as of Q3 2024, indicating strong core business performance.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Bumble, providing a deeper understanding of the company's financial health and market position.
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