It’s been almost three weeks since Bumble (NASDAQ: BMBL)
announced their Q3 earnings, which sent shares down more than 30% to their all-time lows. But it looks like a temporary low has been put in, with the stock of the online dating application gapping up close to 6% at yesterday’s open. Still, there’s a long road ahead if their shares are to get back to their pre-earnings prices, but for those of us on the sidelines and open to taking on some additional risk this holiday season, Bumble offers an interesting opportunity
Like with many hot-shot tech companies in recent years, Bumble’s first few months of public trading have been a disappointment after all the hype they generated prior to their IPO last February. They’d already fallen as much as 50% at the start of summer, and, though they’d recovered somewhat since, were still down 40% from their all-time high by the time management released their latest earnings report.
Good and Bad Updates
At first glance, investors would have been forgiven for thinking it had the potential to be considered an at-worst neutral report, given their year-on-year revenue jumped 24% and was well ahead of what analysts had been expecting. But a greater than expected loss, that expanded on the figure covering the same period last year, spooked Wall Street, and called into question the company’s valuation. To compound the growing loss, their user numbers also declined, at a time when rival dating app Tinder actually saw its user base grow.
Understandably, their shares have been under pressure since, but it’s starting to look like the bears have run out of steam and that the absolute worst-case scenario is already priced in. The folks over at Raymond James certainly think so anyway, as they were out with an upgrade to Bumble shares yesterday to start the week, raising them from a Market Perform rating to an Outperform rating. In a note to clients they said “we believe the move is overdone”, and that the top-line revenue number was “solid”, before adding "Bumble remains well positioned in the attractive online dating market with a strong brand and ARPPU opportunities from pricing optimization and product innovation yet to come."
Their price target of $48 suggests there’s upside of close to 40% to be had from where shares closed yesterday evening, which should appeal to those of us with an appetite for a comeback story and recovery play. Raymond James’ comments echoed those from the Evercore ISI team who made a similar move last week, and also upgraded Bumble shares to Outperform. They said at the time that “one quarter does not make a trend and we see upside to the Street's FY '22 estimates as well as to the Street's Q4 Bumble App net adds estimates."
The Evercore team is also of the opinion that the fundamentals and longer-term opportunity haven’t changed, and that ultimately "Bumble is a reopening play and the company should also benefit from key growth catalysts - international expansion, tiered pricing, and product development, in addition to benefiting from option value in potential app store fee changes". Their $50 price target suggests there’s even more upside to be had than what Raymond James is forecasting, and combined these two new additions to the bull camp should be more than enough to kickstart a near-term recovery in the share price.
Investors thinking of getting involved have last week’s all-time low to use as a safety exit point, and can work a stop loss below that. To the upside, if shares can get to $42 there’s a good chance they’ll start to quickly fill in the post-earnings gap. The stock’s RSI is already starting to move up
from the low 20s, and the MACD is on the verge of having a bullish crossover within the week, both solid technical indicators to have behind you if you’re opening up a fresh position. Bumble still has a ways to go yet before they can fully convince Wall Street of their powerhouse potential, but that doesn’t mean their shares can’t get back some of their famous hype in the meantime.
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