Piper Sandler, on Thursday, adjusted its outlook on Bumble Inc. (NASDAQ: BMBL), reducing the price target to $7 from the previous $13 while maintaining a Neutral rating on the company's stock.
The revision follows a significant drop in Bumble's share price, which fell approximately 30% after hours, prompted by the company's announcement of a comprehensive strategic shift and updated estimates.
The dating app company has embarked on a three-pronged plan aimed at revitalizing user growth. The strategy focuses on enhancing the ecosystem, improving customer experience, and advancing monetization efforts.
However, this shift is expected to result in several quarters of subdued top-of-funnel trends, which are anticipated to lead to a considerable downgrade in Bumble app revenue growth projections for 2024, from an initial 10% year-over-year to now just 2%.
The magnitude of the company's strategy reset came as a surprise to many, despite general expectations of a forthcoming adjustment. The analyst from Piper Sandler expressed uncertainty regarding the time frame required for the new strategy to yield results, especially considering potential additional challenges if consumer spending declines.
Bumble has been the subject of multiple downgrades from various financial institutions. Citi, for instance, downgraded the company's stock from Buy to Neutral and halved its price target, citing a disappointing outlook and challenges in attracting new users.
Similarly, BTIG analysts downgraded the company, anticipating a decline in app payers and revenue. Evercore ISI followed suit, adjusting its rating from Outperform to In Line due to lower than expected second-quarter earnings and significant revisions in revenue growth projections.
Despite these downgrades, Wolfe Research maintained an Outperform rating, albeit with a reduced price target. Bumble's second-quarter revenues fell short of expectations, totaling $268.6 million, but it surpassed earnings expectations with a profit per share of 22 cents. The company's recent acquisition of Geneva Technologies aligns with Bumble's strategy to expand its services beyond dating.
InvestingPro Insights
In light of the recent strategic changes at Bumble Inc. (NASDAQ:BMBL) and the subsequent adjustment of the company's stock price target by Piper Sandler, it's worth considering additional insights from InvestingPro. Notably, Bumble's management has been actively buying back shares, which could signal confidence in the company's long-term value. Moreover, the company is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential undervaluation.
InvestingPro Data reveals a market capitalization of $1.02 billion, with a high adjusted P/E ratio of 109.7 for the last twelve months as of Q1 2024. Despite the stock's significant drop over the last week, month, and year, with a one-year price total return of -55.2%, Bumble's revenue growth remains positive at 14.98% for the same period, indicating some underlying business strength.
InvestingPro Tips also highlight that Bumble is expected to be profitable this year, with net income projected to grow. This is an important consideration for investors looking at the company's future earnings potential. For those interested in deeper analysis, there are over 10 additional InvestingPro Tips available that provide further insights into Bumble's financial health and stock performance.
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