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Here's Why Bumble Stock Stumbled on Thursday

By Jon Quast – Nov 11, 2021 at 12:30PM

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Are paying users leaving the platform or is this just a technical challenge?

What happened

Shares of dating app company Bumble (BMBL -2.94%) stumbled on Thursday after the company reported a decline in paying users. A bevy of Wall Street analysts followed up by lowering their price targets for the stock, adding to today's pain. As of 11 a.m. EDT, Bumble stock was down 17%.

So what

For the third quarter, Bumble generated revenue of $200.5 million, up 24% year over year and actually ahead of management's previous guidance. But it seems that this small beat was fueled by a 19% increase in average revenue per user, not an increase in users. In fact, the company saw overall paying users decline from 2,927,300 last quarter to 2,866,000 in third quarter.

A person appears sad while looking at their phone.

Image source: Getty Images.

According to The Fly, four analysts lowered their price targets for the stock as a result of third-quarter results. The largest drop came from Susquehanna analyst Shyam Patil, going from $70 per share to $58. These price targets aren't the de facto truth for where Bumble stock is headed, but they do suggest that conviction for this business among investing professionals is going down.

Now what

In the third quarter, Bumble spent over $55 million on sales and marketing expenses, a 46% year-over-year increase that didn't yield an increase in paying users. That's the most troubling sign here for this young company.

But it's possible this is just a one-time issue. The company's Badoo platform, popular in international markets, had an Android issue that disabled payments. Management is working on a solution, and we could see paying users return once this gets straightened out. It's definitely something to watch.

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

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