buzz (NASDAQ: BMBL) the stock has gone virtually nowhere since the company raised $ 2.2 billion via its IPO in February. Investors are very skeptical of the company’s prospects, and I don’t blame them. At first glance, there are far too many dating apps to choose from – the competition is only going to increase.
But Bumble Stock has a lot more honey in the hive than what can be seen from the outside. In fact, it has several favorable winds to drive its undervalued stock price higher. Let’s take a look at why opening a big stake in tech stock could pay off big down the line.
Bumble’s value proposition
Bumble changed the rules of the dating game with a little tweak – only allowing women to take the lead and make the first move after a match. The change may be small, but its effects are large. First of all, such a setup allows women to avoid the hassle of unsolicited direct messages, thus improving the overall security of the platform. Second, it allows women and men to reverse the roles typically expected of them in traditional dating environments.
Last year, Bumble’s namesake app and its dating-oriented social network Badoo surpassed 100 million users, ranking it just below the dating conglomerate. Match groupthe Tinder app.
But Bumble also has another feature, its BFF (best friends forever) offering for those seeking friendship (without benefits). In the first quarter of this year, user engagement on Bumble BFF increased by 83% for men and 44% for women compared to the same period last year. The feature is perfect for those looking to hone their social skills and connect with new people after pandemic lockdowns.
Ready for growth
Bumble’s market cap is around $ 9 billion at the time of this writing, not much compared to its exceptional growth potential, as investing in stock could be like buying Match in its early days (Match is now a $ 45 billion company).
Bumble is catching up, reaching 21.4% market share as of April 30 (the second largest in the country), or about half of Tinder’s market share of 46.3%. In the first quarter of 2021, its revenue increased 43% year-on-year to $ 170.7 million. Its total number of paid users also increased by 30% to 2.8 million. Like all mid-growth companies, Bumble operates at a loss for the sake of continued investment and innovation.
Speaking of the last part – Bumble takes a drastically different approach than any of its peers. On July 24, the company will open its first all-day, orange, beehive-themed Bumble Brew cafe and wine bar, conveniently located in the heart of Lower Manhattan. Before the pandemic, the company launched pop-up shared workplaces in major cities known as “Bumble Hives” to connect users in person and expand the reach of its brand.
Bumble stock is an attractive buy at the moment. Although stocks are trading at eight times income, the growth has been impressive. When Match first went public in 2015, short sellers and analysts took a bearish tone on the company, citing “limited growth opportunities.” However, they ignored Tinder’s international expansion, which easily offset the limits of growth in North America.
I believe the same will happen to Bumble. In fact, history is already moving. The app is rapidly gaining traction in India, where it amassed four million out of a total of 31 million dating app users in the country by mid-2020 (and double the number of users as of end of 2019). The company even partners with Bollywood actresses to promote its app.
Overall, due to its high scalability, international expansion, reasonable valuation, and promising new ventures, Bumble is the type of stock that can be a mainstay in your portfolio. And I wouldn’t be surprised if the company dwarfs its competition in the not-so-distant future.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.