Bumble (NASDAQ:BMBL) has stumbled since its debut on Wall Street. But could the recent IPO now be worth a short-term romance or perhaps longer in your trading account? Let’s review what’s happening off and on the price chart of Bumble stock, then offer a risk-adjusted determination aligned with those findings.
Debuting on the Nasdaq Composite at $76 last month, but now fetching around $71, BMBL stock has been a tough relationship for investors. It was worse though. At last week’s lows and as the broader indices became reacquainted with a ‘risk-off’ approach to equities, the upstart dating platform sank to a new low of $61.17.
Moving forward, is Bumble worthy of an investment? Alternatively, could it get uglier, or, depending on one’s vision, even more beautiful at lower share prices? It’s the roughly $7.50 billion mid-cap question being waged between bulls, bears and more fluid Wall Streeters to be sure. So, what are investors to believe?
Bullish investors may take their cue on Bumble’s impressive ability to solve problems and fill gaps, which has produced strong sales growth and even profitability for the outfit in a pre-Covid world. InvestorPlace’s Larry Ramer likes BMBL on those grounds today and for the long-haul.
Specifically and under the stewardship of CEO Whitney Wolfe Herd, Bumble has critically removed “pain points” for people in the app-based dating market. Ms. Herd has differentiated Bumble’s mission from her past position as co-founder of Tinder. Unlike Tinder, Bumble is driven by a ‘Women First’ strategy.
Based on BMBL’s success, which enjoys monthly active users in excess of 42 million through September 2020, and impressive growth of 30% in its paid user base, the company has also launched Bumble BFF and Bumble Bizz. Those platforms are for making friendships and business networking. And while each may sound as though they’re encroaching on Facebook’s (NASDAQ:FB) bread and butter markets, Larry stresses otherwise. I’ll take his word for it.
Others are less gung-ho about owning Bumble stock, at current prices at least. Matt McCall’s research has him with a “wait and see” approach given its current premium price multiple and underwhelming implied sales growth of about 15% during the pandemic. A more meaningful low towards Bumble’s more exclusive IPO levels would have Matt’s full attention, but BMBL is obviously a long ways from sealing that type of deal.
Bumble Stock Daily Price Chart
Source: Charts by TradingView
So what are investors to do with Bumble? There’s not a whole lot of price information to base a decision on if we’re to use Bumble’s daily price chart. Shares are less than a month old. And relying too heavily of the meaning of one trendline versus another, or various well-intentioned but less significant Fibonacci levels, is tricky.
The good news is there are ways to gain long exposure in Bumble stock while avoiding potential pain points which could threaten today’s shareholders using BMBL’s options. One favored strategy is selling the July $45 / $35 put spread and purchasing the July $80 / $90 call vertical for a modest debit of less than 50 cents.
Bottom-line, this limited risk combination aligns investors with buying Bumble on weakness towards the more exclusive and appreciably more attractive price levels Matt was eyeing. On the other hand, if some of Larry’s enthusiasm holds true in the weeks and months into July, a genuinely nice outsized return on investment is also possible.
On the date of publication, Chris Tyler does not hold, directly or indirectly, any positions in securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.