The online dating market is competitive, with several companies looking for ways to distinguish themselves from the pack. Bumble (BMBL -0.57%) is one of the leaders in the space. It has sought to attract customers by putting women in charge of initiating conversations.
Bumble's goal to empower women has seen success within its namesake app, but that hasn't been enough to keep the stock afloat over the past year. Bumble's shares are down by roughly 40% over the trailing-12-month period. Is now a good time to invest in the company?
One of these apps is not like the other
One of the most glaring aspects of Bumble's business is that the company's two main platforms, Bumble App and Badoo App, are moving in entirely different directions. Badoo has been around since 2006 and is especially popular in Europe and Latin America. Unfortunately, Badoo has encountered issues of late and isn't performing nearly as well as Bumble App.
The company's first-quarter results illustrate that. In the period, Bumble's total revenue of $243 million grew by 16% year over year. Bumble App's revenue jumped by more than that, rising 26% year over year to $194 million. Further, Bumble's namesake app saw its paying users soar by 31% year over year to 2.3 million. Meanwhile, Badoo App's revenue and paying users declined.
Bumble also owns a French-based dating platform, Fruitz, that helps match people based on the type of relationship they seek. But at the moment, Bumble App is doing most of the heavy lifting for the company. Bumble's net loss per share for the first quarter was $0.01, compared to net earnings per share of $0.12 reported in the year-ago period.
Bumble's first-quarter results were mixed, but the company's namesake app remains its most important asset.
What does Bumble's future hold?
Bumble was originally founded by its current CEO, Whitney Wolfe Herd, who also happens to be the co-founder of Tinder. Maybe that's why Bumble App adopted the swipe left/right model Tinder popularized, but the focus on empowering women has clearly played a role in the app's success. Bumble's efforts to put women at the forefront go beyond letting them be the ones who can kick-start conversations with men.
The company seeks to create a comfortable and safe online dating experience. In my view, this approach should continue to yield benefits. In the first quarter, Bumble App was either first or second in terms of downloads among dating apps in key regions such as the U.S., Canada, the U.K., France, and Germany. The app is making solid headway in India and Latin America as well.
According to some estimates, India is one of the fastest-growing online dating markets in the world. And online dating does not benefit from high penetration in Asia. In other words, there is a vast opportunity in these regions for Bumble. Naturally, the company will have to contend with competitors, most notably the larger Match Group, Tinder's parent company.
But Bumble has been able to coexist with Match so far. Dating apps aren't mutually exclusive. People can and do use multiple options. And Bumble App's secret weapon -- its women-centric approach to online dating -- is poised to remain a key differentiator that attracts users to the platform. Things would look highly promising if Bumble's business were limited to its namesake app.
But the fact that Badoo App is losing steam complicates matters. It's unclear whether Badoo will turn things around, but even with this issue, Bumble's forward price-to-sales (P/S) of 2.5 looks somewhat reasonable. A forward P/S under 2 is generally considered good. While Badoo App puts a dent in Bumble's prospects, Bumble App has a great future and should remain a leader in online dating through the foreseeable future.
Bumble should continue growing its revenue at a good clip. The company isn't far from consistent profitability, which is a good sign for investors. I wouldn't break the bank to invest in Bumble right now, but it might be worth it for investors comfortable with a bit of volatility and focused on the long game to initiate a small position in the company.
