Sometimes making a coupling work is all about second chances, and apparently Wall Street is ready to give Bumble (BMBL 5.65%) another shot. J.P. Morgan analyst Cory Carpenter upgraded shares of the world's second largest player in online dating apps on Tuesday, boosting his rating from neutral to overweight. His $55 price target translated into 65% in upside from Monday's close.
Carpenter isn't the lone suitor here. This is the third week in a row that Bumble stock has been upgraded by a Wall Street pro. Bumble initially took off after going public at $43 earlier this year, but it's been a broken initial public offering (IPO) for the past four weeks. It has shed more than half of its peak value, but it's hard to keep a fast-growing disruptor that also happens to be a clear reopening play down for long.
Getting it right the second time
Carpenter recently met with Bumble management, walking away encouraged about its near-term prospects. The stock broke below its initial February IPO price in early November after posting disappointing quarterly results. The 24% in year-over-year revenue growth was ahead of its earlier guidance, but Bumble did report a problematic sequential dip in paying app users. The bottom line also took a hit as a result of a rise in marketing spend.
Carpenter feels that bailing investors may have overdone the pessimism by focusing solely on the slowdown in app payer growth. The app itself is showing strong growth momentum. Carpenter also believes that net subscriber additions for Bumble in 2022 will outpace this year's performance.
Bumble's namesake site stands out in a crowded realm of dating apps in that only women can initiate a potential connection. It's the world's second-most popular dating app in terms of revenue generation. Bumble also operates Badoo, the fourth-highest grossing app worldwide.
Last week it was Andrew Marok at Raymond James upgrading the shares with an outperform rating and a $48 price target. With the stock falling 30% since its poorly received third quarter, Marok felt the time was right to get back into the stock. Leaning on Bumble's solid guidance for the current quarter, Marok argued that the outlook suggests a strong performance in average revenue per user.
The week before that it was Evercore ISI analyst Shweta Khajuria kicking off the run of upgrades. She chimed in with an outperform rating and a $50 price target. Khajuria felt at the time that the weak net adds in the third quarter was not the start of Bumble losing market share. She saw upside to market estimates for net adds in the fourth quarter as well the year ahead.
Growth has slowed at Bumble, but it doesn't mean that the fundamentals are starting to deteriorate. Two events in the past few months -- affiliates of the company that helped take Bumble public unloaded a ton of shares in September and the disappointing third-quarter report in November -- have weighed on the stock, but neither move is fatal. The stock sale in September may have expanded the public float, but it didn't change the outstanding shares count. Last month's report was a letdown, but even there Bumble managed to show its prowess in monetization by posting a 19% year-over-year increase in average revenue per user.
Bumble is still a solid growth stock with a clear runway to take off as we claw our way out of this pandemic and back to the rites of courtship. Getting in on the stock for less than February's IPO price makes Bumble attractive, and like the app itself it's up to potential investors to make the initial connection to get to know the stock a little better.