Loop Capital has reiterated its Buy rating on Bumble Inc. (NASDAQ: BMBL) with a steady price target of $10.00.
The firm adjusted its forecast for the company's future financial performance, citing recent conversations with investor relations (IR) and management's discussions at competitor conferences.
Bumble's management noted a continued slowdown in the app's user growth during the third quarter, following a similar trend observed in the second quarter.
The firm has reduced its average revenue per paying user (ARPPU) estimate for the fourth quarter of 2024 by 2%, as Bumble's management prioritizes enhancing the app's ecosystem over immediate monetization efforts.
The new CEO, Lidiane Jones, is concentrating on refining the quality of user interactions within the app. Additionally, the ARPPU is facing downward pressure due to the company's expanding international user base, which affects the revenue mix.
Loop Capital's revenue projections are now $4 million below the consensus, with adjusted EBITDA estimates $1 million under the consensus for the current year. However, the firm emphasizes Bumble's solid financial position, highlighting its cash reserves, low debt-to-capital ratio, and free cash flow (FCF) generation as protective factors for the company's balance sheet. According to Loop Capital's 2025 estimates, Bumble's current stock price implies a roughly 30% free cash flow yield.
The firm also compared Bumble's valuation with that of Match Group (NASDAQ:MTCH), noting that Bumble trades at 4 times enterprise value to EBITDA (EV/EBITDA), while Match Group trades at 9 times.
Despite the bearish investor sentiment towards Bumble, which has seen its shares decline by 58% year-to-date as opposed to Match Group's 4% drop, Loop Capital believes the disparity in valuation is unwarranted.
In other recent news, Bumble Inc. reported a 3% rise in total revenue to $269 million in Q2 2024, supported by a 14% increase in paying users. However, the company anticipates a modest revenue decline in Q3 and a slight full-year growth. Remarkably, Bumble's net earnings surged to $38 million, up from $9 million the previous year, due to a 9% decrease in operating expenses.
Several analyst firms have adjusted their outlook on Bumble. TD Cowen downgraded the company's stock from Buy to Hold, citing concerns about year-over-year revenue declines in the second half of 2024. Similarly, KeyBanc, Susquehanna, and Citi have also lowered their ratings and price targets for Bumble, pointing to potential growth challenges and strategic overhaul concerns.
In contrast, Bumble has made strategic moves to diversify its offerings with the recent acquisition of the community app Geneva.
InvestingPro Insights
As Bumble Inc. navigates a period of strategic refocusing and market challenges, InvestingPro data provides additional context for investors considering the company's stock. With a market capitalization of approximately $799.73 million and a P/E ratio standing at 19.41, Bumble presents a nuanced investment profile. Notably, the company's PEG ratio, which combines the P/E ratio with expected earnings growth, is 0.13 for the last twelve months as of Q2 2024, suggesting potential for growth relative to its earnings.
The company's stock price has experienced significant volatility, with a 59.49% decline over the past year, reflecting investor caution. However, InvestingPro Tips highlight that Bumble is expected to grow its net income this year and maintains a robust free cash flow yield, which could be appealing for investors looking for companies with strong cash generation capabilities. These factors, coupled with the fact that Bumble's liquid assets exceed its short-term obligations, provide a degree of financial stability.
For those interested in a deeper analysis, InvestingPro offers additional tips that can be found at https://www.investing.com/pro/BMBL. Among these, investors can explore the implications of Bumble's low P/E ratio relative to near-term earnings growth, the recent downward revisions by analysts for the upcoming period, and the company's moderate level of debt.
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