Newly minted public company Bumble (NASDAQ:BMBL) has shown an impressive ability to generate ideas that solve important problems and fill gaps in the social-networking space. BMBL stock looks like a long-term winner, based on its strong growth and pre-pandemic profitability.
Perhaps most importantly, Bumble seems to be really good at alleviating customers’ “pain points.” As I learned from my best business school professor, Mark Burgess, who taught marketing courses at Rutgers-Newark, a company’s strength is in it’s ability at solving their customers’ most important problems.
In my opinion, Bumble has definitely accomplished that important goal in very creative ways. A strong team led by founder and CEO Whitney Wolfe Herd is ready to take on app-based dating. She had previously been a co-founder of Tinder, which, along with dating platform Match.com (NASDAQ:MTCH), is a unit of IAC/InterActiveCorp (NASDAQ:IAC).
BMBL Stock Fueled By ‘Women First’ Strategy
In Bumble’s eponymous flagship dating app, women always have to write to men first. Of course, that is the opposite of the traditional dating “rules,” which “require” that men almost always “make the first move.”
Over the years, many women I’ve known have expressed frustration with the stigma on single females writing to men first on dating websites and apps. These women have said that they would like to have an opportunity to “wow” the men of their choice, rather than (for the most part) only being able to connect with men who write to them first.
And, truth be told, many single men get tired of nearly always having to make “the first move” and (in most cases) having to deal with the risk of rejection inherent in that. That’s a “pain point” and Bumble’s innovation reduces that for many singles.
More Than Just Dating and Hook-ups
Meanwhile, Bumble has launched two other innovative apps that also alleviate important “pain points.” Specifically, the company has launched Bumble BFF and Bumble Bizz which, respectively, seek to put together people who are looking for friendship and business networking opportunities.
Over the last 10-15 years or so, Facebook (NASDAQ:FB) has connected friends, Twitter (NYSE:TWTR) has connected those with similar political views, numerous dating apps and websites have romantic linkups covered, and LinkedIn connected colleagues. But until Bumble launched Bumble BFF and Bumble Bizz, no prominent social media have focused on creating business connections and friendships.
Over the longer-term, I believe that these two apps, which have no real competitors, will prove to be very successful, meaningfully boosting BMBL stock in the process.
Bumble Has Delivered Strong Results
Bumble’s growth and profitability numbers validate my points about the strength of its offerings and strategy. From its December 2014 launch, the Bumble app grew to an impressive 12.3 million active users as of Sept. 30, 2020, while the company’s monthly active user base came in at 42.1 million.
In the first nine months of 2020, the number of paid users of the Bumble app jumped 30% year-over-year to 1.1 million, while the company’s paid user base climbed 19% YoY to 2.4 million. That’s especially impressive considering that, for much of 2020, the pandemic made dating quite challenging.
In 2019, when dating was normal, Bumble’s EBITDA rose 40% to $101.8 million, while the firm’s free cash flow soared 44% to $91.7 million.
Valuation Cements the ‘Buy’ Case
Based on the success of the company and the strong innovations it has introduced, I expect it to become much more successful in coming years. I expect its friendship and networking apps to grow a great deal. I also would not be surprised to see the company launch a successful social networking website and app that takes meaningful market share from Facebook and Snap (NYSE:SNAP).
Given these points, I definitely believe that BMBL stock is a buy at its current market capitalization of $7.2 billion.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.