In Feb. 2021, while retail investors were in the midst of a love affair with meme stocks and short squeezes, Bumble (BMBL 2.79%) soared 64% on its first day of trading. Evidently, early investors weren't overly concerned about whether the Bumble app would be able to compete against Match Group's (MTCH 2.50%) better-known dating app, Tinder.
However, it didn't take long for investors to treat Bumble stock like a jilted lover. While the tech wreck of late 2021 and early 2022 has undoubtedly created headwinds, the horrendous first-year performance of Bumble stock raises questions about the company's value proposition.
Still, as Bumble's financials improve -- and as the company expands into new markets -- Bumble stock could be a good match for risk-tolerant traders.
A rocky relationship
Saying that Bumble competes with Match Group would be an understatement. Match Group has even sued Bumble over alleged similarities between the Tinder and Bumble apps, and Bumble has openly rebuffed Match Group's apparent attempts to copy or acquire it.
Regardless, Bumble must contend with Match Group's undeniable market presence. While Bumble operates its eponymous app and Badoo -- along with an incoming third app, but more on that later -- Match Group's portfolio includes the ever-popular Tinder, OkCupid, Match.com, and Plenty of Fish, among others. Besides, Match Group's $2.8 billion of trailing-12-month revenue simply dwarfs the $719 million that Bumble generated in the same period.
Bumble does, however, have at least a couple of strong points in its favor. For one thing, the Badoo dating app is popular in Europe and South America. Moreover, the Bumble app offers a unique experience as women (in opposite-gender dating matches) must make the first contact on Bumble.
A fruitful venture
While Bumble's women-as-first-movers approach differentiates it from competing apps, Badoo's foothold in foreign markets could make Bumble a global-scale threat to Match Group.
Enhancing that threat is Bumble's acquisition of a third dating app, Fruitz. Bumble claims that Fruitz appeals to Generation Z, and that its use has grown rapidly in France, Belgium, the Netherlands, Switzerland, Spain, and Canada.
The app's name apparently comes from the use of "playful fruit metaphors" to communicate dating intentions. And while the Bumble app reduces the intimidation factor by letting women take the lead, Fruitz supposedly adds playfulness and removes "the fear of judgment for both men and women" through the use of fruit symbolism.
Targeting Zoomers makes sense as young users will often have many years of dating ahead of them. Investors are right to wonder, though, how much Bumble shelled out for Fruitz -- a major detail that was omitted from the deal announcement.
Ripe for profits
Until (and unless) the company releases the financial details of that transaction, it's going to be difficult to properly assess the potential of Bumble's latest venture into Europe.
Then, there's the question of whether Bumble can afford to make a potentially costly acquisition. The company had $292 million in cash and cash equivalents as of Sept. 30, 2021. How much of that will be spent on Fruitz is something investors are left to wonder for now.
The company also reported swinging from an $84 million net loss, during the period from Jan. 29 through Sept. 30, 2020, to a $302 million net profit during the nine months ended Sept. 30, 2021. If the company can remain profitable and maintain a healthy cash balance, Bumble's expansion with Fruitz could be an important step in further expanding its share of the industry.
Where Bumble stumbled
Bumble isn't the only dating-app business with global ambitions, of course. For example, Match Group has Pairs, Japan's top dating app, and it spent $1.7 billion for South Korea's Hyperconnect last June. But the Fruitz addition could make Bumble more competitive against its main rival on an international scale.
Where Bumble went wrong was in omitting the financial details of the Fruitz acquisition. To woo skeptical investors during a share-price downturn, a little bit of transparency can go a long way.
Nevertheless, some investors might not mind that omission and decide to wager on Bumble's European venture anyway. The stock's volatility makes it a risky choice -- much as in online dating, the potential for disappointment will always be present.