Is Bumble Stock a Buy?

Bumble's (BMBL -1.55%) stock price surged 42% on March 9 after the online dating company posted its fourth-quarter earnings report. That pop was surprising since it actually missed analysts' top and bottom estimates.

Its revenue rose 26% year over year to $208.2 million, but missed analysts' estimates by $1 million. Its net loss narrowed from $26.1 million to $14.7 million, or $0.08 per share, but also missed analysts' expectations by seven cents. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 24% to $54.8 million.

Image source: Getty Images.

Bumble expects its revenue to rise 21%-23% year over year in the first quarter of 2022, and to grow 22%-23% for the full year. That was roughly in line with analysts' expectations for 23% growth in the first quarter and 22% growth for the full year. Bumble expects its adjusted EBITDA margin to dip slightly for the full year, from 27.1% in 2021 to 26.5%-27% in 2022.

Bumble's big post-earnings rally might seem unjustified, but the stock had already been crushed prior to the release of its earnings report. Even after its latest gains, Bumble's stock remains 45% below its IPO price and 70% below its all-time high. So is it finally safe to pick up some shares of this former highflier?

A sequential stabilization in paying users

Bumble's total number of paying users rose 11% year over year to 2.98 million in the fourth quarter. Bumble's namesake app, which lets women make the first move, grew its paying users by 29% to 1.64 million.

However, paying users at its "Badoo and Others" segment fell 6% to 1.34 million. Badoo is an older app that was founded in Russia but is now based in London and primarily operates in Europe and Latin America.

By comparison, Bumble's larger rival Match Group (MTCH -0.84%), which owns more than a dozen dating apps, grew its total number of paying users by 15% year over year to 16.2 million in the fourth quarter.

Bumble's stock crashed over the past year because it failed to keep pace with Match and its total paid users fell sequentially in the third quarter. However, both of its segments gained users sequentially again in the fourth quarter:

Data source: Bumble.

During the conference call, Bumble founder and CEO Whitney Wolfe Herd said its namesake app "continues to accelerate growth and gain share," but that Badoo still faced some headwinds related to the omicron variant of the coronavirus pandemic and options trading.

Bumble closed its acquisition of a third app, a French dating app called Fruitz, in January. Fruitz didn't boost its Badoo and Other numbers in the fourth quarter, but it will be integrated into the segment in the first quarter.

Bumble's total average revenue per paying user (ARPPU) rose 14% year over year to $22.83, with 10% growth at Bumble and 2% growth at Badoo. But its total ARRPU still dipped 1% sequentially -- with a 1% decline at Bumble and a 3% drop at Badoo -- due to currency-related headwinds and its ongoing expansion into lower-revenue overseas markets.

Match grew its comparable revenue per payer (RPP) 8% year over year to $16.16 in the fourth quarter. Bumble's ability to generate higher ARPPU -- and grow that metric at a faster rate year over year -- is a good sign.

Reassurances about Russia

After Russia invaded Ukraine in late February, Bumble's stock stumbled as investors fretted over the company's exposure to Russia through Badoo.

It addressed those concerns by stating that its combined revenue from Russia, Ukraine, and Belarus only accounted for about 2.8% of its revenue in 2021, nearly all of which came from the Badoo and Other segment. Those three markets account for less than 0.1% of Bumble's app revenue.

Bumble also said it will discontinue its operations in Russia, and remove all of its apps from Apple's App Store and Alphabet's Google Play Store in Russia and Belarus. During the call, Wolfe Herd said that "substantially all of our technical workforce -- including product development, data science, and engineering -- is based in the U.S., U.K., and Spain." She also noted that none of its senior leadership was based in Russia and that its "entire cybersecurity team is based outside of Russia, primarily in the U.K."

Is Bumble's stock too cheap to ignore?

With a market cap of $4.4 billion, Bumble trades at just five times its 2022 sales target for 22%-23% growth. Match, which is expected to generate just 18% sales growth this year, trades at eight times that estimate. However, Match is also better diversified, leads the online dating market with Tinder, and serves a much larger global audience than Bumble's limited portfolio.

Therefore, I don't expect Bumble to revisit its IPO price anytime soon, especially as rising interest rates curb the market's appetite for unprofitable growth stocks. Bumble isn't doomed yet, but there simply aren't enough reasons to buy the stock when bigger blue-chip tech plays are still on sale.