Should Investors Take a Second Look at Bumble Stock?

Bumble (BMBL 2.45%) had a less-than-memorable year in 2021, its first as a publicly traded company. But are investors making a mistake in overlooking the dating app company? In this segment of Backstage Pass, recorded on Dec. 13, Fool contractors Rachel Warren and Danny Vena and Fool analyst Asit Sharma discuss. 

Rachel Warren: That brings us up to the company's IPO. I'm going to share my screen here real quick. Just an interesting company and history, which is really quite complicated for a dating app. [laughs] There we go.

Can you guys see that OK? Awesome.

Again, what I was saying here, company was launched in 2014. Whitney was one of the few self-made female billionaires, became one of the few in that club when the company went public in February of this year. Bumble has offices around the world with hundreds of employees in cities including London, Barcelona, Moscow, and Austin, Texas.

It's been a bit of a rough time for the company since its IPO. That took place on February 11th of this year, that propelled the company to a $13 billion valuation, its IPO was priced at $43 a share.

The stock was up 63% on IPO day. Not uncommon for newly public companies but shares have fallen, last I checked, about 50% since the stock went public, and its market cap [laughs] has shrunk considerably and is now a little bit less than $5 billion dollars.

As you can see here, it has considerably trailed the market since it became a publicly traded company.

How does Bumble make money? As I mentioned, Bumble, parent company of two apps, Bumble and Badoo. On the Bumble app, there are three different types of services you can use. There's Bumble Date where women make the first move. But Bumble is increasingly trying to brand itself as being more than just a dating app.

There's Bumble Bizz where you can make business connections, and Bumble BFF, you can get on if maybe you're in a new city and you just want to make some friends. Interestingly, Badoo, which I feel like not as many people have heard of, it is one of the most downloaded dating apps in the world.

They're both free to download, so how the company makes money from both of those apps is users can buy premium features, Bumble also sells various services, merchandise, and gift cards. For example, you can subscribe to Bumble Premium which gives you advantages like unlimited swipes, better filters, you can use it if you're traveling to a city that's other than where you usually live.

There's other paid features that allow you to do things such as like tell a match you're interested, Badoo also has similar premium features. It's an interesting company.

I wanted to look really quick at its financial performance. We only have several financial reports for the company because it is newly public. We have from 2020 and then the first three quarters of this year, thus far.

It's been a mixed experience in terms of revenue and net income. Looking back at 2020, its revenue was up from the previous year. Bumble app revenue was $360.5 million compared to $275.5 million in the previous year. Badoo app revenue was also up. Total paying users in 2020 increased more than 22% from the prior year. The company did report a pretty steep net loss that about not quite doubled from the prior year.

Fast forward to 2021, it's been a mixed period. Revenue was up across both of its apps, total paying users jumped 30% in the first quarter of this year.

The company was actually profitable in the first quarter of this year, with its net earnings comprising 190% of its revenue. But then these last two quarters, the company has reported net losses despite revenue growth in the double digits.

The stock fell again after its most recent quarterly report, which was decidedly mixed. Total revenue was up 24% year-over-year. Revenue from the Bumble app was up about 40% year-over-year, that is its fastest-growing app.

But Badoo, that revenue declined 3%. Total paying users were up, average revenue paying user was up, net loss was slightly less than the previous quarter and slightly down year-over-year. The company was profitable on an adjusted EBITDA basis. The company also reported that it had cash and cash equivalents at about $292 million versus total debt of $624 million.

I think the point that investors have been a little iffy on is it's been struggling with profitability. Again, not uncommon for a newly public company, and it's also spending a lot to grow its platforms and spending a lot on marketing.

The company is forecasting total revenue in the range of $765 to $768 million, which would be considerably higher than its 2020 revenue of about $582 million. This is an interesting company. I like it. I'm not too concerned by neither numbers I'm seeing here partly because the company is relatively new.

It's only about seven years old and it's only been public since earlier this year. I don't know if you guys have thoughts on this. I think it's one to watch. I don't know that it's one I'd jump on right now.

Asit Sharma: Rachel, I was curious of metrics that you've listed, what is the most important to you as far as pushing the company's performance? Is it that average revenue per user? What would be a catalyst in your eyes to make you feel like, I'm moving from this slight conviction range here to much more interested in this is a long-term hold.

Rachel Warren: There's a few metrics I look at here. Obviously, revenue is one. I would be more concerned about its lack of profitability, was it not so newly public and the company's working so hard to expand its platform and paying user base around the world. I believe as of a couple of years ago, the company had about 100 million users worldwide.

So it's paying customer base is still really a small fraction of its overall customer base. Another thing that I look at is, besides paying users is average revenue per paying user, which is steadily on the uptick.

I think for me, I would like to see a little more consistent profitability before I buy in. But for me, those numbers of revenue, total paying users, and average revenue per user, they seem to be in a good place and I find that encouraging.

Danny Vena: I'm still not convinced that I'm going to buy it, but I certainly have more information to base my decision on.