Where will Bumble Stock be in 5 years?
buzz (NASDAQ: BMBL), which only lets women take the first step on its namesake dating app, went public in February at $ 43 a share. The stock opened at $ 76 a share on the first trading day, peaked at $ 84.80 a few days later, but lost momentum and fell below its IPO price in May.
The stock is now trading in the $ 50 range, but its volatile beginnings have burned many investors. I recently weighed the bull and bear cases for Bumble’s stock and concluded that it could double or triple again in the next five years if its earnings continue to increase by around 20% per year.
Today, I will delve deeper into the company’s short-term challenges, its plans for the future, and how they might support its long-term growth.
2021-2022: Conquering the pandemic
Bumble’s biggest short-term challenge is the pandemic. Its revenue grew 36% in 2019, but only grew 19% in 2020 as more people stayed at home throughout the crisis. Growth picked up again in the first half of 2021 as people started dating again, and he expects his revenue to increase from 29% to 31% for the full year.
However, the recent spread of the Delta variant could still make it difficult for Bumble to meet those goals, even as the company claims it can continue to withstand the headwinds associated with the pandemic.
On last quarter’s conference call, CEO Whitney Wolfe Herd said, “Despite the challenges the world is facing with the Delta variant, we continue to see positive trends on our platforms, even in some of the most affected markets. . “
Next year, analysts expect Bumble’s revenue to rise 24% to $ 943 million. We should take this estimate with a grain of salt, but the stock looks cheap at 10 times that estimate. Its larger and slower growing rival, Match group (NASDAQ: MTCH), is trading at 12 times next year’s sales.
2023-2024: Broaden its geographic reach
Bumble and its little Badoo app are currently in use in dozens of countries. It generated 55% of its sales in North America last year and the remaining 45% in overseas markets.
Management is yet to disclose its overseas growth by country, but it highlighted India as a major growth market for its namesake app last quarter. Even though the delta variant has spread across India, the number of monthly active users (MAUs) of the company grew by 60% year-over-year during the quarter.
India’s online dating market could grow at a compound annual rate of 17.6% between 2021 and 2025, according to Statista Research, making it one of the fastest growing markets in the world for dating apps. The company expects user penetration rates for dating apps in India to increase from 3% in 2021 to 4.3% in 2025 (still less than a third of the US penetration rate of 15.2%).
Bumble could have an advantage over its competitors in India, as its app naturally protects its users from unwanted advances. This focus on security could address concerns about the escalation of violent attacks against women in India over the past decade.
It could also acquire smaller regional dating apps over the next few years to diversify its portfolio beyond its two primary apps. By comparison, Match generates most of its revenue from Tinder, but also has over a dozen other apps that target specific regions and demographics.
2025 and beyond: extend its functionality without an appointment
Bumble and Badoo had 2.9 million paying users last quarter, up from 15 million paying users in Match’s last tally. Over the next five years, Bumble will likely continue to grow at a faster rate than Badoo. It could acquire more apps to gain new users, but it could also expand Bumble’s non-dating features to become a female-focused social network.
The two main non-dating features are BFF, which focuses on platonic relationships, and Bizz, which is designed for business relationships. Last quarter, Wolfe Herd said 10% of MAUs were already using BFF, indicating that it has “immense permission to be a much larger brand to find friends and ultimately a more lifestyle brand. wide for women “.
Bumble has yet to directly monetize BFF, but MAUs that accessed both its dating and BFF features generated an average revenue per user (ARPU) 30% higher than date users alone last quarter. . Wolfe Herd noted that Bumble could potentially monetize BFF with ads.
Going forward, the combination of BFF, Bizz, and other new non-dating features could support Bumble’s evolution into a female-focused social network. This extension could differentiate it from Match applications, generate new advertising revenue and even support the integration of “social shopping” features.
A recent partnership with Break (NYSE: SNAP), which incorporated Snapchat’s augmented reality lenses into its video calls, highlights the potential for the business to grow beyond swipe-based dating. Bumble’s first cafe and wine bar, which opened in New York City last summer, could also pave the way for more partnerships with third-party restaurants for its apps.
Plenty of room for growth
Bumble still faces stiff competition from Match, but I think there is enough room for more players to thrive in the online dating market. If Bumble overcomes the pandemic and continues to grow, it could generate much larger profits for investors over the next five years.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.