On Tuesday, Deutsche Bank reiterated its Hold rating on Bumble Inc. (NASDAQ:BMBL), with a steady price target of $7.00. The firm's analyst underscored that Bumble is preparing to release its third-quarter earnings after the market closes on November 6, 2024.
Following a significant revision of its fiscal year 2024 revenue growth forecast, from 8%-11% year-over-year to a mere 1%-2%, Bumble's shares plummeted by 29% versus a 2% increase in the S&P 500. Since that initial drop, Bumble's stock has rallied, gaining 25% and surpassing the S&P 500 by 15%.
Investors are keenly awaiting the end of the negative re-rating cycle and are curious if it will extend into fiscal year 2025. The analyst noted that in two of the three years since Bumble became a public company, management has provided forward-year guidance during the third quarter. However, given the current uncertainties surrounding user monetization and a weakening new user inflow, there is a possibility that Bumble may choose to withhold detailed guidance this year, potentially until the fourth-quarter report to offer more insights into fiscal year 2025.
The analyst projects that Bumble will report approximately 44,000 net additions to the Bumble App in the third quarter, aligning with the general market expectation of an increase of 42,000. The revenue estimate for the third quarter stands at $273 million, which is at the midpoint of the management's guidance and consistent with market expectations. For the third quarter adjusted EBITDA, the projection is $80 million, matching the management's guidance and slightly exceeding the Street's forecast by about $1 million.
The report also anticipates that Bumble will continue to utilize its $450 million share repurchase program, with $209 million remaining from the authorization at the end of the second quarter. To adopt a more positive stance on Bumble's stock, evidence of a resolution to the company's user acquisition challenges and an end to negative earnings revisions is required. The reiterated price target of $7 is founded on a 5.5x fiscal year 2025 estimated enterprise value to EBITDA multiple.
In other recent news, Bumble Inc. has experienced a series of analyst downgrades and adjustments to revenue expectations. Loop Capital maintains a Buy rating on Bumble, highlighting the company's solid financial position, despite reducing its average revenue per paying user estimate for the fourth quarter of 2024. TD Cowen, KeyBanc, Susquehanna, and Citi have all lowered their ratings and price targets for Bumble, citing concerns about year-over-year revenue declines and potential growth challenges.
Bumble's Q2 2024 financial results revealed a 3% rise in total revenue to $269 million, supported by a 14% increase in paying users. However, the company anticipates a modest revenue decline in Q3 and a slight full-year growth. Bumble's net earnings surged to $38 million, up from $9 million the previous year, due to a 9% decrease in operating expenses.
In response to these challenges, Bumble has diversified its offerings with the recent acquisition of the community app Geneva. As Bumble navigates these challenges, the company remains committed to enhancing the quality of user interactions within the app and refining its strategy for long-term value creation.
InvestingPro Insights
As Bumble Inc. (NASDAQ:BMBL) approaches its Q3 earnings release, InvestingPro data provides additional context to the Deutsche Bank analysis. The company's market cap stands at $1.23 billion, with a P/E ratio of 22.22, suggesting a moderate valuation relative to earnings. Bumble's revenue for the last twelve months as of Q2 2024 reached $1.09 billion, with a notable revenue growth of 11.11% over the same period.
InvestingPro Tips highlight that Bumble's management has been aggressively buying back shares, aligning with the analyst's expectation of continued utilization of the share repurchase program. This strategy could potentially support the stock price and signal management's confidence in the company's future prospects.
Another relevant InvestingPro Tip indicates that Bumble is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.15 as of Q2 2024. This metric suggests that the stock might be undervalued considering its growth potential, which could be of interest to investors looking for value opportunities in the tech sector.
For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for Bumble, providing a deeper understanding of the company's financial health and market position.
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