May 27, 2021
[4 min Read]
Bumble Inc. (NASDAQ: BMBL) provides online dating and social networking platforms worldwide. They are the parent company of Badoo and Bumble, two of the world's highest-grossing dating apps where over 40 million users come on a monthly basis to discover new people and connect with each other in a safe, secure and empowering environment. The online platform enables people to connect and build equitable and healthy relationships on their own terms.
Bumble's mission is to create empowering connections in love, life and work. They promote accountability, equality and kindness in an effort to end misogyny and rewrite gender roles
Bumble's strategy to grow their community across both apps relies primarily on an organic user acquisition model. They hold strong beliefs that their brand connects deeply with users and makes it a powerful marketing tool for them. Some key elements of growing their community include:
Bumble's financial model is characterized by a combination of growth, scale, strong profitability and cash flow generation. Both Bumble and Badoo apps monetize via a “freemium model” where though the use of the service is free, users have the option to pay for subscriptions or in-app purchases to access premium features. These features allow users to maximize the probability and speed of developing meaningful matches.
Since the founding of the Bumble app, they have engaged in a wide range of social impact efforts to further their mission such as:
Bumble's biggest competitor is Match's ‘Tinder' app making up about 33% of the U.S dating app market share (refer to chart) in contrast to Bumble's 21% market share in the U.S environment. Given the basic mechanics of the apps that are essentially identical, the notable difference is that straight men can't message women until the woman has initiated the conversation. Tinder has gained user sentiment and has established itself in the dating app community as “best for hookups” with 22% of Tinder users saying they use the app to find hookups. In contrast, Bumble has created a brand for themselves to be beyond meeting intimate partners but also making meaningful relationships, friends and creating business connections.
With changes in social conversation changing and changing fast, particularly with key events such as the #MeToo movement, female safety and female empowerment is very strong branding for Bumble. Given modern progressivism becoming more and more empowering for women, Bumble has curated a brand and reputation that fits today's changing era that not only has a positive impact in the community for women but instills empowerment for those who use the app.
Looking on the financial side, Match has shown consistent growth with 12% earnings growth in 2019 and 6% in 2020 and an expected 12% rise for 2021. Despite Bumble's net loss of $84.1M in 2020 down from 2019's profit of $68.6M, it still remains profitable on an adjusted EBITDA basis. Though Match is a solid stock, Bumble shows more growth potential in the market and is currently undervalued at its trading price of $41.48.
For the comparable analysis, I found 4 companies that were of competition to Bumble in the dating app space. These companies are Match Group ($MTCH) that operates a portfolio of brands that includes Tinder, Match, OKCupid, Hinge, PlentyofFish, and etc., Sparks Networks ($LOV), Snap Inc ($SNAP), and Twitter ($TWTR). From the P/S ratio, we derive a share price of $50.04 representing a 20% upside.
Bumble's unique model creates a niche competitive advantage over its competitors. Considering its most prominent competitor Match ($MTCH), Bumble is currently undervalued in terms of EBITDA margin, forward sales and cash flow. It has been thus far successful in gaining market share in the U.S online dating space and still has ample potential to grow further.