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Making its public market debut in early 2021, social and dating service app Bumble (BMBL) didn’t exactly launch at the most fortuitous time. After all, society was still very much mired in the COVID-19 crisis. At the same time, fundamental fanfare was robust. With the pandemic forcing everyone to isolate for a long stretch of time, it sparked pent-up demand for services specializing in socialization.
For forward-looking contrarians, BMBL stock may have seemed an intriguing opportunity. Sure, the timing of Bumble’s initial public offering was inopportune. Nevertheless, at some point, the COVID-19 crisis would fade away, either through vaccination or herd immunity. Sure enough, the pandemic eventually petered out in the rearview mirror. Sadly, so too did the market value of BMBL.
While shares initially popped higher earlier this year, they began stumbling soon enough. Since the January opener, BMBL stock finds itself below parity to the tune of 18.4%. Also, in the trailing 365 days, it gave up over 46% of equity value. Since the first public close, Bumble tanked almost 78%. Theoretically, the red ink might intrigue extreme speculators.
However, risk-averse investors should probably steer clear. Here’s why.
Options Traders See Little Reason for Optimism in BMBL Stock
Given the 52-week range between $14.73 to $39.33, BMBL stock features the mobility to attract market gamblers. Still, the latest read from Barchart’s screener for unusual stock options volume tells a discouraging tale for bullish investors.
Following the close of the June 26 session, total volume reached 15,397 contracts against an open interest reading of 91,950. Further, the delta between the Monday session volume and the trailing one-month average metric came out to 159.34%.
Drilling down, put volume soared to 15,209 contracts while call volume only mustered 188 contracts. This pairing yielded a put/call volume ratio of 80.90, dramatically favoring the bears on paper. In addition, the put/call open interest ratio presently stands at 4.81, which again has bearish implications.
When it rains, it pours, with the Barchart Technical Opinion indicator rating BMBL stock a 96% strong sell. In addition, it suffers a 60-month beta of 1.82, which is significantly more volatile than the underlying stock market.
In all fairness, BMBL stock currently enjoys a moderate buy consensus rating. Out of 17 analysts, nine rate shares as a strong buy while two peg the company a moderate buy. The remaining six assess Bumble as a hold, which is generous considering the unfavorable stats in the derivatives market.
Also, the mean price target among covering Wall Street experts stands at $24.53. Based on Monday’s close of $16.68, we’re talking about 47% upside potential. Though an encouraging forecast, it’s tough to get excited about Bumble’s prospects.
Troubled Value Proposition Amid Broader Pressures
Early this month, I mentioned that BMBL stock may encounter challenges from a tricky economic backdrop. Specifically, singles have revealed minimum-income red lines regarding their relationship prospects. However, having such standards could limit Bumble’s addressable market because of headwinds such as mass layoffs and rising unemployment.
Moreover, Bumble trips itself with its insistence that women make the first move in traditionally oriented relationships. First, it’s presumptuous to assume that all female users want to adhere to this odd directive. Second, this format is mostly superficial and likely bears zero impact on a relationship’s power dynamics.
Sure, I understand Bumble Founder and CEO Whitney Wolfe Herd’s ambition to empower women. It’s 100% noble. But women asking men out in a dating platform is likely not going to address patriarchal hegemonies. Let’s face it – women continue to take their husbands’ surname, Bumble or no Bumble.
Finally, BMBL stock just doesn’t make much sense from a valuation perspective. Right now, shares trades at a forward multiple of 107.53. That seems astronomical.
Now, at a sales multiple of 2.39, Bumble could be considered undervalued relative to revenue. However, the company’s top-line growth rate has been steadily declining. In Q1 2022, revenue growth landed at 23.03% on a year-over-year basis. Over the next four quarters to Q1 2023, YOY sales growth came out to 18.38%, 16.82%, 16.7% and finally 15.67%.
Eventually, even the somewhat favorable sales multiple may encounter speedbumps. Therefore, investors should exercise healthy skepticism toward BMBL stock.
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.
