Online dating business Bumble (NYSE: BMBL) has performed well in Q3, with a solid top line, driven by 19% growth in its average revenue per paying user (ARPPU). But the BMBL share price plummeted 20% after an initial 6% jump.
Why did BMBL stock drop?
So, why has the Bumble share price been hit so hard? There appears to be near-term pressure on paying users at the Badoo app. The Bumble customer in the Badoo app is experiencing many COVID-19 headwinds. Meanwhile, rival dating-app Tinder saw a 90% increase in paid users in the quarter, so investors were expecting Bumble to do the same.
Plus, the company suffered a Q3 net loss of $10.7 million, when analysts had forecast a loss of $4.7 million. That equates to a net loss of 6 cents per share compared to a loss of 1 cent per share in Q3 2020.
Meanwhile, although revenue beat expectations and year-over-year comparisons, it didn’t wow investors. Total revenue was $200.5 million, which beat analyst estimates by $1.7 million, which can’t be considered a spectacular jump.
What is Bumble’s revenue guidance?
Headquartered in Austin, Texas, Bumble provides online dating services via two mobile applications: Bumble and Badoo.
At a group level, Bumble delivered total revenue of $200.5 million, up 24% year-over-year.
Revenue from its Bumble app came in at $142 million, a whopping rise of 39%. Meanwhile, revenue from its Badoo app and other sources fell 3% to $58 million.
In Q3, it counted 2.87 million total paying users. This figure was up year-over-year, but down from the 2.93 million such users it had in Q2.
Despite the drop in users, the company raised its full-year 2021 guidance for both revenue and adjusted EBITDA.
For the full year, its revenue guidance now comes between $765 million and $768 million. This represents a growth rate of 32% at the midpoint of the range. It also comes in above analyst estimates of $761.6 million.
And its adjusted EBITDA guidance now projects between $205 million to $207 million, representing a margin of 27% at the midpoint.
Meanwhile, its Q4 guidance indicates total revenue to be between $208 million and $211 million, representing a growth rate of 27% at the midpoint of the range. And it expects adjusted EBITDA of $53 million to $55 million, which represents a margin of 26% at the midpoint.
Anu Subramanian, CFO of Bumble, said:
“We believe we are well positioned for the fourth quarter, given our ongoing product and market leadership combined with the operating leverage in our cost structure. Based on these factors, we are raising our full year 2021 outlook for both revenue and adjusted EBITDA.”
How has Bumble fared since IPO?
Bumble launched via initial public offering in February to great fanfare. The event generated global interest as its founder Whitney Wolfe Herd became the world’s youngest self-made female Billionaire at 31 years of age. The BMBL share price enjoyed a 52-week high of $84.80 at IPO but has since lost nearly half its value. It’s down 49% year-to-date.
Bumble claims its ethos focuses on friendship, love and community. And the core of its mission is to create a world where all relationships are healthy and equitable. It is pleased to report this appears to be working, and consumer research shows:
A significant majority of our users believe that Bumble App is modern, safe and easy to use, and the brand is viewed as empowering and as a force for good.
While the market for internet dating is competitive, Bumble believes it has a competitive advantage in its “unique strengths and differentiated core value proposition”.
Statistics show people on the internet dating circuit often use multiple apps at any given time. Yet, in 2020, the internet dating business had a global (excluding China) total addressable market (TAM) of $5.3 billion.
So, there’s plenty of market share to play for, and many jurisdictions are only just getting started.
How are Bumble’s international expansion plans playing out?
Bumble is expanding its international footprint in Western Europe. So far, it is seeing signs of success in Germany, France, and the Benelux region of Belgium, the Netherlands, and Luxembourg.
It is also making expansive progress in Mexico, Brazil, and Indonesia.
Is Bumble gearing up for the metaverse?
Bumble is aware of the buzz around the metaverse, as per the latest announcements from Facebook (NASDAQ: FB), Nvidia (NASDAQ: NVDA), and Disney (NYSE: DIS). But it does not see itself leading the dating sector into this new virtual world.
Nevertheless, it is keeping a close eye and has said it will happily interact with a suitable virtual experience when one emerges. In the meantime, it is exploring extending its options through the application of blockchain and crypto.
Bumble’s president, Tariq M. Shaukat, said:
“We want to make sure we're setting the technical and engineering foundation for whatever emerges in the metaverse and in the Web3 world’.
Will Bumble stock fall further?
Bumble is not the only tech stock to suffer after earnings in recent weeks. And ever since Elon Musk’s controversial Twitter poll, the S&P 500 has been on shaky ground.
So, will BMBL stock fall further to retrace previous lows? Considering their technical analysis, some chartists believe it is certainly possible that Bumble will go back down to $38.
Year-to-date, the S&P 500 has risen over 25%. It faltered in September but resumed a bullish trajectory in October. Now investors are once again becoming nervous. Bumble is one of many tech stocks to take a tumble in the past week, along with Coinbase (NASDAQ: COIN), Moderna (NASDAQ: MRNA), PayPal (NASDAQ: PYPL) and Square (NYSE: SQ), to name a few.
Bumble is an organic growth business relying on the viral power of word-of-mouth influence and persuasive marketing.
As long as it can keep its image fresh and vibrant, it may well continue to thrive. But it may not be plain sailing as infiltrating new geographies comes with multiple headwinds.
Also, its reliance on inclusion in the Apple (NASDAQ: AAPL) app store could prove problematic if Apple’s new rules prevent it from tailoring targeted ads. Nevertheless, there’s hope Apple’s new fee structure could prove beneficial to Bumble’s profit margins if costs drop.