Bumble's (NASDAQ:BMBL) stock tumbled to its lowest levels since May after the online dating company posted its third-quarter earnings on Nov. 10. Let's review the numbers and see if its post-earnings plunge is a buying opportunity.

How fast is Bumble growing?

Bumble's revenue rose 24% year over year to $200.5 million in the third quarter, which beat analysts' estimates by nearly $2 million.

Bumble's revenue from its eponymous female-oriented app rose 39% to $142.5 million, while its number of paid users increased 20% to 1.53 million. Its average revenue per paying user (ARPPU) grew 16% to $30.99.

However, its revenue from Badoo, an older dating app which is more popular in Europe and Latin America, fell 3% to $58.0 million as its number of paid users dipped 9% to 1.33 million. Nonetheless, that app's ARPPU still rose 6% to $13.75.

A person uses a smartphone outside.

Image source: Getty Images.

Bumble's strengths largely offset Badoo's weaknesses: Its total number of paid users rose 5% to 2.89 million, while its total ARPPU grew 19% to $22.97.

During the conference call, CEO Whitney Wolfe Herd said Bumble experienced "strong engagement across the app with record levels of activity once again in monthly active and daily active users."

As for its international expansion, Wolfe Herd said Bumble was making "meaningful progress" in Latin America, generating "robust growth" in Southeast Asia, and growing "very nicely" in India.

Mind the sequential slowdown

Bumble's year-over-year growth rates look stable, but Bumble's sequential growth in paid users decelerated as its total number of paid users fell 1%:

Period

Q1 2021

Q2 2021

Q3 2021

Bumble Paying Users (Millions)

1.35

1.47

1.53

Growth (QOQ)

7%

9%

4%

Badoo Paying Users (Millions)

1.45

1.45

1.33

Growth (QOQ)

2%

0%

(8%)

Total Paying Users (Millions)

2.80

2.93

2.89

Growth (QOQ)

4%

5%

(1%)

Source: Bumble. QOQ = Quarter-over-quarter.

By comparison, Match's (NASDAQ:MTCH) total number of payers, led by its flagship app Tinder, increased 16% year over year and 9% sequentially to 16.3 million in its latest quarter. Match's ability to grow its larger user base at a faster rate than Bumble's small one is troubling.

Badoo, which Bumble inherited from Wolfe Herd's initial partnership with Badoo's founder Andrey Andreev, also seems to be struggling to compete against Match's diversified portfolio of specialized dating apps.

On the bright side, Bumble's total ARPPU increased 10% sequentially in the third quarter, which outpaced Match's 4% sequential growth in revenue per payer (RPP) last quarter. During the call, Wolfe Herd also pointed out that Bumble's core app "gained download share on a quarter-over-quarter basis in all of its core markets, including US, Canada, UK and Australia."

Bumble is still unprofitable

Match is consistently profitable, but Bumble isn't. In the third quarter, Bumble narrowed its net loss from $22.8 million to $10.7 million, but its net loss per share widened from $0.01 to $0.06 and missed estimates by a nickel.

Bumble's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 1% to $54.5 million, which surpassed the high end of its previous guidance of $48-$50 million.

But its adjusted EBITDA margin still declined from 33.1% to 27.2%, mainly due to its higher cost of revenue and marketing expenses. By comparison, Match reported an adjusted EBITDA margin of 36% last quarter.

Starting in 2022, Alphabet's Google will reduce its take of all first-year subscription fees for Play Store apps from 30% to 15%. A recent injunction against Apple, which still charges a 30% rate for the first year and a 15% rate for the subsequent years, will also enable apps to redirect users to external payment platforms to bypass its App Store fees.

Those decisions will likely boost Bumble and Match's gross margins, since app store fees are a major cost of revenue for both companies. During the call, Bumble CFO Anuradha Subramanian said Google's decision could be "very positive" for Bumble and other app developers, and that the company felt "very good" about building a new external payment platform for its iOS users.

Bumble's guidance provides optimism

For the full year, Bumble expects its revenue to rise 31%-32% and for its adjusted EBITDA to grow 34%-36%. Back in August, it only expected its revenue to rise 29%-31% and for its adjusted EBITDA to grow 28%-31%.

That upbeat forecast indicates Bumble will continue to expand, it will offset Badoo's weaker growth, and that its adjusted EBITDA margins will stabilize.

Bumble's stock trades at about eleven times this year's sales. Match, which is generating slightly slower revenue growth, trades at about 15 times this year's sales. Investors seem more willing to pay a premium for Match's more diversified portfolio of apps and stable profits, but Bumble also seems undervalued relative to its growth potential.

Bumble needs to fix a lot of problems, but I still think it's worth buying after its post-earnings plunge. Its core app is still growing, it continues to raise its guidance, and the app store changes could boost its gross margins soon.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.