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One Nasdaq stock that rocketed yesterday (25 June) was Bumble (NASDAQ: BMBL). It jumped 25%, bringing the return since early April to 80%.
However, over a longer timeframe, Bumble hasn’t exactly been a match made in heaven for Wall Street. Since going public in 2021, the share price is down by a whopping 91%, shredding the market cap from around $15bn to just $715m.
Founder-led business again
Bumble was founded in 2014 by Whitney Wolfe Herd. To stand out in a sea of competition, she flipped the script. Instead of men messaging women, which was the norm on dating apps like Tinder (which Herd also co-founded), only women could initiate the conversation with heterosexual matches.
This female-friendly format was wildly popular for a few years, but growth started to peter out in 2024. Herd stepped down, and her replacement effectively dropped the rule that women must message first. This damaged — or at least weakened — Bumble’s unique selling proposition.
The founder returned in March. Since then, Herd says she has been “returning [Bumble] to what makes us trusted, unique, and deeply human“.
Start-up mentality
The news that sent the stock up yesterday was that the company will lay off nearly a third of its global workforce. This will save $40m per year after $13m-$18m in charges are incurred. It will reinvest this on product and technology development.
In an email to staff, the CEO said this restructuring will help restore a “start-up mentality…rooted in an ownership mindset and team structures designed for faster, more meaningful execution“.
For the second quarter, Bumble expects revenue to be $244m-$249m, up from previous guidance of $235m-$243m. Analysts forecast full-year revenue of $956m, which would be a year-on-year decline of around 10.8%.
Looking to next year, there isn’t much revenue growth pencilled in, though that might be intentional. Bumble has signalled that it wants to deliver “a more intentional experience with more quality and relevant matches“.
In other words, it sounds like the firm is focused on improving the user experience rather than marketing for revenue or user growth.
Perhaps unsurprisingly then, the valuation appears very cheap. The stock is trading at 0.6 times sales and 9 times forward earnings.
If Bumble manages to steady the ship and then reignite growth, the stock could be set for a big comeback. It’s still down 33% over the past 12 months, even after rebounding 80% since its April low.
Why I’m bearish
Leaving aside the lack of growth, there’s another fundamental reason why I won’t touch the stock. This is that dating apps just aren’t that scalable, in my eyes.
Unlike social media platforms that benefit from endless user engagement, dating apps are designed to be deleted. Once users find a match — the whole point of the product, in theory — they often leave. That makes churn high and long-term retention tricky.
What’s more, many users are saying that they’re fed up with the ghosting and lack of connection on dating apps. Not to mention the bad dating experiences! We see evidence of this with Tinder owner Match Group, which is also struggling for growth.
I prefer to invest in companies that have powerful growth engines. Unfortunately, Bumble doesn’t, and that’s a risk. Therefore, I’m going to pass and look for a better match for my portfolio.
