In the era of social distancing, online dating has never been more popular. This trend served as a major tailwind for Bumble (NASDAQ:BMBL), but since it went public last month, Bumble stock looks even better.
Shares of the dating app soared at its market debut opening at $76, up from the company’s IPO price of $43. It’s no surprise that Bumble was so well received by investors.
The company is breaking barriers in the dating world by letting women make the first move on its app.
Under the helm of its CEO, Whitney Wolfe Herd, Bumble has managed to stray from the crowd and make a name for itself in the increasingly competitive world of dating.
Bumble Stock Makes a Buzzy Debut
Bumble’s public debut could not have been timed better. Tech stocks, specifically social media stocks were at an all-time high and online dating was a major pandemic trend.
The company is also well-diversified with a European-based dating app Badoo under its wing. Bumble counts Match Group (NASDAQ:MTCH) which includes Tinder, Hinge and OK Cupid as a major competitor. With a market value of $6.9 billion, Bumble has a lot of catching up to do but it’s growing faster than its peers.
There are several reasons to invest in Bumble when looking at it from a purely financial perspective. In 2019, the company estimated revenues at $488.9 million which was up 36% from the previous year. However, as CNBC reports, earnings as of September 2020 came in at $416.6 million.
For the same nine months of 2019, earnings came in at $362.6 million- a 15% increase. So when it comes to a good growth play in the dating space, there’s no doubt that Bumble is among the top names.
Looking at the bigger picture, sales are expected to grow by 20% given the opportunities ahead for online dating. Bearing that in mind, that the recent tech selloff has pushed the stock down to the low $60s.
This is in no way a reflection of Bumble’s performance but a correction of the broader markets. If anything, it’s a perfect buying opportunity for investors who are looking to make their move on Bumble stock.
Women Make the First Move
Now that we’ve looked at Bumble’s growth potential by the numbers, here’s why I think the stock is a great buy for its business model. Bumble has always positioned itself as a platform for female empowerment, allowing women to make the first move on the app.
The company’s ability to successfully challenge and disrupt an age-old status quo is admirable. Furthermore, Bumble is an advocate for free speech and has taken corrective action to curb all forms of hate on its platform. This unique quality in itself gives Bumble a strong competitive advantage in an industry that is saturated.
A second tailwind is the changing trends in dating. With social distancing rules in place, online dating became the only way to connect with others during the pandemic.
Although no one can say for sure how these trends will change in the new normal, it’s worth betting that they will remain at least a little sticky. Digital-first has become the underlying theme across various industries and it could become the norm for dating as well.
Finally, it’s also worth noting that Bumble has expanded its app beyond dating to include Bumble Bizz and Bumble BFF. This opened up a huge market for the company as people downloaded the app to form professional connections. In the long-term, these subsidiaries could be huge growth drivers for the company.
The Bottom Line
Bumble made a strong market debut but it does come with its challenges. The company’s price-to-sales ratio is quite low when compared to other tech companies. Adding to this is the uncertainty surrounding the momentum of online dating post-pandemic. However, if you’re willing to bet on its long-term growth while overlooking short-term headwinds, Bumble stock is a great buy.
If anything, the company’s CEO and newly-minted tech billionaire, Whitney Wolfe Herd’s dreams of changing the rules of dating for the better make this stock a worthy investment.
On the date of publication, Divya Premkumar held a long position in BMBL stock. She did not hold (either directly or indirectly) any positions in the other securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.