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Despite the buzz around its unique approach to online dating, Bumble (BMBL) has certainly faced its share of challenges, giving investors reason to be wary. But even amid the turbulence, it might be premature to write off this once-popular platform. With a modern twist to dating dynamics and the inherent volatility of the sector, Bumble's story might just be in its middle chapters, suggesting potential investment opportunities ahead.
Now, it’s time for a confession. I have not been the biggest fan of Bumble. It's hard to see its unique selling point when the digital age has revolutionized how people connect for various reasons. A significant pain point? Bumble's protocol mandates women initiate contact in traditionally oriented matches. While laudable in intent, this approach potentially halves the user interaction, especially if male users sit passively.
Further complicating matters, Bumble is contending with larger economic headwinds. In an era marked by job insecurities, a stable income becomes an unspoken criterion in the dating world. A quick glance at its chart performance reveals distressing figures.
Year-to-date, BMBL's value has plummeted almost 24%. Look back a year and you're staring at a near 34% decline. And since its debut on the trading floor? A gut-wrenching drop of over 79%.
Yet, as Daniel McClellan, an expert in ancient languages aptly puts it: "data over dogma." Current metrics hint at the possibility of Bumble reaching its nadir. If true, this could signal stabilization and for the hopeful, a subsequent rebound.
Decoding the Options Puzzle for BMBL Stock
Last week, BMBL stock emerged as a focal point on Barchart’s unusual stock options volume screener following the close of trading on Sept. 15. Intriguingly, total volume skyrocketed to 18,376 contracts versus open interest of 104,248 contracts. This sharp uptick — a staggering 657.77% more than the previous month's average — was hard to ignore.
The inner workings of these trades paint a fascinating picture. A mere 89 contracts belonged to calls, whereas puts accounted for a whopping 18,287 contracts. Such a dramatic put-to-call ratio of 205.47, juxtaposed against an open interest put/call ratio of just 4, might initially sound alarm bells for BMBL stock, hinting at heightened bearish sentiment.
Yet, the realm of options is a double-edged sword. While buyers hope for the stock to swing their way, sellers or writers typically bet against them. Delving further into the data maze, Fintel’s options flow screener — tailored to pinpoint substantial block trades indicative of institutional moves — reveals an astounding 16,500 contracts sold for the Nov 17 '23 12.50 Put.
This freshly penned option, devoid of prior open interest appears to carry the hallmark of an institutional move. After all, it represents 97.65% of the total volume for this contract.
But what does this mean for the everyday investor? The stock could be presenting a compelling opportunity. Take the average implied volatility (IV) at the $12.50 strike, which sits at a relatively modest 53%. But shift your gaze upwards to the $17.50 strike and the IV balloons to 403%.
Conventionally, traders lean towards selling options rife with high IV while scooping up those with lower IV. As such, BMBL's current position could be hinting at underlying value ripe for the taking.
Possible Deep Value for Bumble
In an unpredictable market landscape, Bumble's recent financial data paints an intriguing image, potentially suggesting an underappreciated investment opportunity.
The company's second-quarter earnings report is an immediate attention-grabber. Bumble reported sales of $259.7 million, surpassing analysts' forecast of $256.6 million. The earnings per share, too, stood tall at 5 cents, outpacing the anticipated 3 cents.
Furthermore, it's notable how Bumble's user base seems to be growing, even in the face of economic headwinds. The reported total of 3.63 million paying users — a jump of 610,000 from the previous year and a beat by 50,000 users from estimates — is an encouraging sign.
Certainly, the road hasn't been smooth for Bumble, yet the company's current metrics suggest a compelling value proposition. In March 2023, BMBL traded at a forward earnings multiple of 90.91X. This metric also stood at a whopping 125X in December 2022. Contrast that to today's 38.76X and the picture becomes clear. While earlier investor skepticism was perhaps warranted, today's numbers hint at a potentially undervalued asset.
No investment comes without risk and Bumble is no exception. However, between the promising fiscal report and the eyebrow-raising actions of institutional investors in the options market, BMBL stock might just be a speculative treasure waiting to be unearthed.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
