Bumble's (BMBL) stock currently trades about 15% below its IPO price and nearly 60% below its 52-week high.

The online dating company lost its luster as investors fretted over its decelerating growth in paid users and lack of profits. The arrival of a new COVID-19 variant and higher interest rates exacerbated that sell-off.

A person using a smartphone.

Image source: Getty Images.

Bumble has certainly been a tough stock to own, but could it make a big comeback next year? Let's compare the bear and bull cases to decide.

What the bears will tell you about Bumble

The bears will argue that Bumble, which only owns two dating apps (Bumble and Badoo), will struggle to compete against Match Group (MTCH -0.17%), the market leader that owns Tinder and over a dozen other dating apps.

Bumble ended last quarter with 2.89 million paid users across both of its apps. That was up 3% from a year ago but down 5% from the previous quarter. Bumble's namesake app gained more users both sequentially and year over year, but those gains were offset by Badoo's declines.

By comparison, Match's total number of paying users, led by Tinder, rose 16% year over year and 9% sequentially to 16.3 million in its latest quarter. Bumble's inability to grow faster than its larger rival is a bright red flag, and it indicates that Badoo -- which is more popular in Europe and Latin America -- could be struggling to keep pace with Match's apps.

Bumble generates most of its revenue from its core female-oriented app instead of Badoo. However, Bumble's own paid users only rose 4% sequentially to 1.53 million last quarter -- compared to its 9% growth in the second quarter. Tinder's paid users grew 8% sequentially to 10.4 million in its latest quarter.

As Bumble falls further behind Match, it's resorting to scattergun strategies -- including opening a restaurant for meet-ups, launching an online store for its own apparel, and teasing vague plans to turn its BFF platform (for platonic friendships) into a "metaverse" with cryptocurrency payments. Those loss-leading strategies could prevent Bumble from turning a profit on a generally accepted accounting principles (GAAP) basis anytime soon.

What the bulls will tell you about Bumble

If we only look at Bumble's user growth, it looks a lot weaker than Match. However, its average revenue per paying user (ARPPU) is still growing at a faster rate than Match's comparable revenue per payer (RPP) metric.

Last quarter, Bumble's total ARPPU rose 10% sequentially, while Match's RPP increased just 4% sequentially. That growth indicates Bumble's core market of female users is still spending more money on its premium features.

Bumble also seems to be pulling more free users onto its platform. During last quarter's conference call, CEO Whitney Wolfe Herd said Bumble's namesake app "gained download share on a quarter-over-quarter basis in all of its core markets, including U.S., Canada, U.K., and Australia."

Bumble's market share in the U.S. has also nearly doubled from 10% in 2015 to 19% in 2020, according to Sensor Tower. That puts it firmly in second place behind Tinder, which held a 40% share last year.

Bumble also continues to grow in Latin America and Southeast Asia, and it's repeatedly highlighted India as one of its fastest-growing markets. Bumble's total international revenue rose 28% year over year in the first nine months of 2021 and accounted for 42% of its top line. That was slower than the 39% year-over-year growth of its North American business, but that balance could gradually shift as it continues its international expansion.

All those strengths enabled Bumble to significantly increase its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for the full year in its latest quarter:

FY 2021 Guidance

Previous

New

Revenue growth (YOY)

29%-31%

31%-32%

Adjusted EBITDA growth (YOY)

28%-31%

34%-36%

Data source: Bumble. YOY = Year over year.

Those are solid growth rates for a stock that trades at just nine times this year's sales. Match, which is expected to generate 25% sales growth this year, trades at 13 times that estimate.

Bumble isn't profitable by GAAP measures yet, but its gross margins could improve next year as Alphabet's Google reduces its Play Store fees for subscription apps. It could also develop an external payment system for iOS devices to profit from the injunction against Apple's rigid rules for integrated payments.

Lastly, Bumble's upcoming relaunch of BFF could also form the foundations of a new social network. That expansion could tether more users to its dating platforms or sow the seeds for a new advertising business.

Why I'm sticking with Bumble

There are plenty of reasons to be bearish or bullish on Bumble. However, I believe its strengths still outweigh its weaknesses.

Bumble's namesake app is still growing its paid users and ARPPU, it has plenty of growth potential in overseas markets, and investors are ignoring its increased guidance and low valuations. Therefore, I'm still swiping right on Bumble and giving it a few more quarters to prove itself.