Shares of popular dating app Bumble (NASDAQ:BMBL) popped higher on Friday, providing small relief for deeply beleaguered shareholders. Providing the catalyst was Loop Capital. Analysts essentially believes the severe red ink now represents a de-risked position. As a result, they rate BMBL stock a “buy,” which nevertheless clashes with seemingly negative options sentiment.
Fundamentally, a core advantage of the dating platform centers on its low bar. With Bumble’s cash balance, effective use of interest rate swaps and free cash flow (FCF) generation protecting the balance sheet, BMBL stock should be able to hit the previously assigned $18 price target.
According to Seeking Alpha, on Loop’s 2024 estimates, the current share price reflects an 11% FCF yield. Further, the experts point out that BMBL stock trades at 8x enterprise value (EV)/EBITDA, compared to Match Group (NASDAQ:MTCH) at 10x.
Moreover, Loop pointed out that plenty of skepticism exists regarding Bumble’s total addressable market as well as the longer-term growth trajectory of the online dating business. However, the analysts counter that the market is excessively discounting the company’s proven growth trek and forward prospects.
BMBL Stock Rises But So Do Concerns
Significantly, Loop stated that this was the first time the research firm had a “buy” rating on BMBL stock since launching coverage two-and-a-half years ago. As a result, the market responded warmly to shares, which initially gained 5% earlier this morning. Still, the options market presents a point of concern.
On the positive front, investment data aggregator Gurufocus states that Bumble’s three-year revenue growth rate (on a per-share basis) stands at 16.8%, above 69% of its peers. As well, BMBL stock trades at only 1.25x book value, well below the sector median of 2.71x.
However, such positives clash against near-term options sentiment. Earlier today, Fintel’s options flow screener — which targets big block trades likely made by institutions — noted that traders bought 7,698 contracts of the Nov. 17, 2023 $12.50 put. This trade appears aggressive consider that BMBL stock trades at around $15 per share.
Also, on Sept. 27, traders sold (wrote) 1,143 contracts of the Jan. 17, 2025 $25, which appears to be another pessimistic trade. Essentially, if BMBL stock fails to reach $25 by the expiration date, the call will expire worthless, allowing the option writer to fully pocket the $154,305 premium.
Why It Matters
Despite the deep red ink on Bumble, analysts still peg shares a consensus strong buy. This assessment breaks down as 10 buys, three holds and zero sells. Also, the average price target lands at $22.56, implying over 50% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
