On Thursday, Citi adjusted its stance on Bumble Inc. (NASDAQ: BMBL) stock, downgrading it from Buy to Neutral and halving its price target from $12.00 to $6.00. The revision follows Bumble's recent announcement of a disappointing outlook and a significant rebuild of its core dating app, which has faced persistent challenges in attracting new users.
The downgrade was influenced by substantial cuts to the company's future earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates, with reductions of 33% and 43% for the years 2025 and 2026, respectively. Citi noted that Bumble's 2024 guidance was materially lowered, and management has not provided a clear timeline for the expected turnaround.
Citi's report highlighted that while Bumble management is opting for a structural overhaul of the app rather than a temporary fix, the necessity of such a fix suggests a deterioration in the platform's ecosystem. The firm acknowledged that the approach might ultimately be the correct solution for long-term sustainability, but emphasized that the process is complex and outcomes are uncertain.
The analyst stated that the lack of visibility on the company’s future performance was a key factor in the decision to move to the sidelines. Citi is now adopting a wait-and-see approach, looking for signals of improvement before reconsidering its position on Bumble's stock.
Bumble's shares are now being watched closely by investors as the company embarks on its efforts to revamp the app and address the underlying issues that have hampered user growth. With the lowered price target and neutral rating, the market is signaled to have tempered expectations for Bumble's near-term performance.
In other recent news, Bumble Inc. has seen a series of downgrades and reduced financial forecasts. BTIG analysts downgraded the company from Buy to Neutral, noting an expected decline in app payers and revenue in the coming months.
Similarly, Evercore ISI adjusted its rating from Outperform to In Line, following lower than expected second-quarter earnings and a significant revision in revenue growth projections. J.P. Morgan and Stifel also downgraded their ratings due to these developments.
Bumble's management anticipates a decrease in revenue for the third and fourth quarters, with a potential decrease in Bumble payers by the fourth quarter. Despite this, Wolfe Research maintained an Outperform rating, albeit with a reduced price target. The company's strategic reset, aimed at improving demographic balance and user experience, is expected to disrupt near-term monetization.
Bumble's second-quarter revenues fell short of expectations, totaling $268.6 million, but it surpassed earnings expectations with a profit per share of 22 cents. The company's recent acquisition of Geneva Technologies aligns with Bumble's strategy to expand its services beyond dating. These are the recent developments for Bumble as it navigates its strategic changes and financial performance.
InvestingPro Insights
Amidst the recent downgrades and market apprehension, Bumble Inc. (NASDAQ: BMBL) shows a blend of challenges and potential according to InvestingPro metrics. The company's market capitalization stands at $1.02 billion, reflecting the current investor valuation. Despite a high P/E ratio of 48.41, Bumble is trading at a low price-to-book ratio of 0.63, which could indicate that the stock is undervalued relative to its assets as of Q1 2024. This is further supported by a PEG ratio of 0.38, suggesting that the stock may be undervalued based on its expected earnings growth.
Revenue growth remains a bright spot with a 14.98% increase over the last twelve months as of Q1 2024, and a gross profit margin of 70.5% demonstrates the company's ability to retain a significant portion of its sales as profit. However, the price of Bumble's stock has experienced considerable volatility, with a one-week total return of -9.03% and a staggering one-year total return of -55.2%, highlighting the recent investor concerns.
InvestingPro Tips further reveal that management's aggressive share buyback strategy and the company's high shareholder yield are notable, with the potential for net income growth this year. Yet, the stock's recent performance has been poor, trading near its 52-week low. For investors seeking more detailed analysis, there are an additional 18 InvestingPro Tips available for Bumble Inc. at https://www.investing.com/pro/BMBL, which could provide deeper insights into the company's financial health and future prospects.
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