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Sparks Fly on Bumble's First Date With Wall Street

By Rick Munarriz - Updated Mar 11, 2021 at 3:55PM

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The dating app operator stepped out for its first quarterly update as a public company Wednesday, and investors liked what they saw.

You never get a second chance to make a first impression, and it's fair to say that Bumble (BMBL -2.24%) nailed its first quarter as a public company. The online dating specialist behind two of the world's four highest-grossing apps reported better-than-expected financial results shortly after Wednesday's close. 

Revenue rose 31% to hit $165.6 million in the fourth quarter, topping the $163.3 million that early analysts had been targeting. Its namesake app did all of the heavy lifting. Bumble -- second only to Match Group's (MTCH -2.06%) Tinder in terms of revenue generation -- experienced a 47% top-line surge. The app now produces 64% of the parent company's revenue. Badoo is the other major app here, but it -- along with other revenue-generating channels -- accounted for the balance of the top-line mix by growing just 11% for the quarter. It's a good overall look, but it's not the only reason that you should swipe right on one of last month's hottest debutantes. 

A woman celebrating with her smartphone.

Image source: Getty Images.

It's the start of a healthy relationship

Bumble's 31% revenue surge is even more remarkable when you consider what we're comparing here. We were deep in the pandemic in the final three months of 2020, with daily new COVID-19 diagnoses surging to levels far above the previous peaks. Recognize that we're measuring that period against the holiday quarter of 2019 -- when the economy was hopping and we were socializing in a mask-free world -- and that 31% revenue growth looks even more impressive. 

Tinder parent Match Group also accelerated its growth in Q4 2020, but it managed to deliver just a 19% year-over-year increase. 

A lot has happened since Bumble hit the market at $43 in early February. Its share price nearly doubled from there to peak above $84 on its second day of trading. In the weeks that followed, it went on to give up roughly half of those gains, and had settled into the low $60s prior to Wednesday evening's report, but it's clearly a more attractive investment in the wake of the release.  

Bumble is doing a good job of converting its freeloaders into paying customers by offering them enhanced access and a better overall experience. The number of total paying users across its platforms has risen by 33% to 2.7 million accounts over the past year.

Now, given that revenue and premium subscribers grew at roughly the same clip, you might have already connected the dots and concluded that average revenue per user must have stayed essentially flat as 2020 played out. Overall, that's largely correct. The company's namesake app did achieve some average revenue per user gains, but those were mostly offset by declining results on that metric from Badoo.

You still have to like this company's potential, and it isn't just a revenue growth story. Bumble also came through on the other end of the income statement, posting a small loss of $0.01 a share. Wall Street pros had been predicting a lot more red ink.

Bumble also provided guidance for the current quarter as well as for all of 2021. The $163 million to $165 million revenue range that it's targeting for the current quarter suggests a slight sequential dip even at the high end of that range. That reflects its business model's seasonality. For comparison, analysts also anticipate Match Group will check in with a sequential dip in revenue from the fourth quarter to the first quarter -- just as it did a year ago. 

The more compelling forecast was the $716 million to $726 million revenue range that it's targeting for 2021. That would translate into 32% to 34% revenue growth, just ahead of the market's expectations.

Whenever one buys an IPO stock, the biggest risks involve the many unknowns. Is this new issue going to beat the market over time, or was the stock offering just part of a mad-dash exit strategy on the part of the early investors? A company's first quarterly report as a public entity can give investors a real hand in terms of helping them sift the good ones from the bad. And Bumble is off to an encouraging start.  

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Bumble Inc. Stock Quote
Bumble Inc.
$27.54 (-2.24%) $0.63
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Match Group, Inc.
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