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Why Bumble Stock Plunged Today

By Jon Quast - Updated May 13, 2021 at 12:58PM

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A beat and a raise weren't enough to keep Wall Street from lowering its outlook for the stock.

What happened

Shares of dating-platform company Bumble (BMBL -10.06%) plunged on Thursday after the company released financial results for the first quarter of 2021. Results exceeded management's previous guidance and its full-year outlook improved. But it wasn't enough for Wall Street, with a slew of analysts lowering their price targets on the shares. As of 11:45 a.m. EDT today, Bumble stock was down 11%.

So what

Bumble generated total first-quarter revenue of almost $171 million. This compares favorably to management's previous guidance of $163 million to $165 million. The total annual growth rate for the top line was 43%, although this was on a pro forma basis, accounting for changes to the business structure leading up to its initial public offering (IPO). Looking just at revenue generated from the Bumble app, however, revenue was up almost 61% year over year to $112.6 million.

A businessman turns away from the camera to face a down red stock chart in the background.

Image source: Getty Images.

Since revenue was ahead of schedule, Bumble management raised its outlook for the rest of 2021. Previously it guided for 2021 revenue of $716 million to $726 million. Now it's guiding for full-year totals of $724 million to $734 million. Of this, management expects between $175 million and $178 million will come in the second quarter, which is more than what analysts were projecting.

Now what

For the first quarter, Bumble beat expectations and raised guidance, which in normal times would cause a celebration. But with fear creeping into the market lately, almost everything is increasingly viewed with a pessimistic spin. For example, eagle-eyed investors point out that management only raised full-year guidance by $8 million, which was the size of its revenue beat in the first quarter. Therefore, this implies that Bumble's management doesn't believe it will overachieve in coming quarters as it did in the first.

Wall Street is lowering its expectations for Bumble stock as a result. According to The Fly, multiple analysts cut their price targets for the stock this morning. The lower targets are still higher than where the stock trades right now, but investors don't respond well when analysts lower their outlooks.

If I were a shareholder, I'd be encouraged that Bumble not only delivered on its revenue guidance but also did better than expected. For an IPO company, it's important for management teams to build a track record of credibility with shareholders. Underdelivering damages that rapport. It's just one quarter, but Bumble did what it needed to in the first. 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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