Bumble (Nasdaq: BMBL) finished 64% higher on its first day of trading, reflecting strong demand for the new issue. The stock opened at $76 which was significantly above the pre-IPO price of $43.
Even this was increased in the weeks leading up to the IPO from its original target range of $37 to $39. In total, the company sold 50 million shares and had a valuation of $7.7 billion. The offering was led by Goldman Sachs (NYSE: GS), JPMorgan (NYSE: JPM), and Morgan Stanley (NYSE: MS).
Bumble Profile
Bumble is a dating app in which women have to initiate the first conversation. It was founded by Whitney Wolfe Herd, who is the youngest female founder to take a company public at 31. She was also a co-founder of Tinder. Bumble is free for anyone to use and join, but it earns revenue from in-app purchases and subscription offerings including Bumble Boost and Bumble Premium.
This business model is similar to other dating apps like Hinge and Tinder which allows users extra features and privileges for additional fees. These have proved remarkably successful like many businesses which boost people's status and mating prospects.
As of the last quarter, Bumble had 12.3 million monthly active users. According to Wolfe Herd, the company's current focus is on increasing the conversion to its paid product, continue growing the user base, and expand internationally.
According to its S-1, it generated $376.6 million in revenue in the first nine months of 2020, with a net loss of $84.1 million. In 2019, it generated $362.6 million in revenue and a net profit of $68.6 million. Currently, Bumble is significantly smaller than its primary competitor, Match Group (Nasdaq: MTCH) which has a market cap of $45.4 billion and generated $2.3 billion in revenue over the last 12 months. Match includes several dating apps including Hinge and Tinder.
Stock Price Outlook
There's a lot to like about Bumble. It's on an impressive growth track. The online dating market continues to grow, and it's shown an ability to constantly increase revenue per user. Further, online dating is a fragmented market as many people are on multiple apps. Bumble also has a unique hook and is considered by many to be more female-friendly than other options.
Match has been one of the best-performing stocks of the past couple of years. However, Bumble is growing 3x as fast as Match. Online dating apps are relatively capital-light businesses with the main challenge being customer acquisition. Currently, 6% of Bumble's users are paying customers. Buying Bumble's stock is a bet that the company can continue growing, increase the percentage of paid users, and the amount paid per user. So far, this seems like a solid bet.