Bumble (NASDAQ:BMBL), which operates several highly popular dating apps, pulled off one of this year’s hottest IPOs (initial public offerings). On the debut, the company’s shares jumped about 63%. Although, with the recent correction in the markets, Bumble stock has lost some of its gains. The market capitalization is now at $7.3 billion.
Whitney Wolfe Herd founded the company in 2014. Before this, Herd was one of the cofounders of Tinder, which is another top dating app. It is owned by Match.com (NASDAQ:MTCH).
The initial backing for Bumble came from Badoo, which has a large presence in Europe and Latin America site. There was an initial investment of $10 million.
Interestingly enough, the deal also sparked a lawsuit from Match, and Bumble fired back with a countersuit. Yet both sides agreed to a settlement prior to the IPO.
So then, what now for the company? What do the growth prospects look like? Let’s take a look:
The Background On The Operations
The dating app market is intensely competitive. But for Herd, she saw this as an opportunity to rethink the whole approach. Bumble would allow women to make the first move. She also introduced urgency in the process, by requiring a response within 24 hours.
This twist was certainly spot-on. The fact is that many women like the idea of turning the tables on the traditional approach.
As a result, Bumble has seen significant growth. Note that at IPO, there were about 42 million active users. And yes, the financials have been robust. For the first nine months of last year, the revenues came to $416.6 million, up from $362.6 million. There was even a profit of $54 million.
One of the keys to the success has been the impact of Blackstone Group (NYSE:BX), which owns a majority of Bumble stock. This private equity powerhouse has a long history of disciplined management when it comes to its investments.
Another factor for Bumble is that the market opportunity for dating apps remain quite large. Note that about 40% of new couples meet online, which is more than in bars and restaurants. Some of the reasons include the ubiquity of mobile devices, delays in marriage and the changes in cultural norms.
Bottom Line On Bumble Stock
While the U.S. market continues to remain strong, Bumble is looking to opportunities to expand its presence in other countries. Consider that there has been traction in India, Germany and Mexico
In the meantime, Bumble is going beyond its dating roots. There is the Bumble BFF feature, which is focused on finding new friends. Then there is Bumble Bizz. Think of this as something like Microsoft‘s (NASDAQ:MSFT)LinkedIn, in which people look for business networking opportunities.
According to the IPO prospectus: “Our platform enables people to connect and build equitable and healthy relationships on their own terms. We believe there is a significant opportunity to extend our platform beyond online dating into healthy relationships across all areas of life: love, friendships, careers and beyond. By empowering women across all of their relationships, we believe that we have the potential to become a preeminent global women’s brand.”
Thus, Bumble is looking to be a social network. And if this strategy works out, it could mean that the company has the potential to be a major digital player.
Now it’s true that the current valuation is far from cheap. But given the strong momentum and the diverse set of segments the company is targeting, the premium valuation is certainly warranted.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.