One Nasdaq inventory that rocketed yesterday (25 June) was Bumble (NASDAQ: BMBL). It jumped 25%, bringing the return since early April to 80%.

Nonetheless, over an extended timeframe, Bumble hasn’t precisely been a match made in heaven for Wall Avenue. Since going public in 2021, the share price is down by a whopping 91%, shredding the market cap from round $15bn to only $715m.

Founder-led enterprise once more

Bumble was based in 2014 by Whitney Wolfe Herd. To face out in a sea of competitors, she flipped the script. As a substitute of males messaging ladies, which was the norm on courting apps like Tinder (which Herd additionally co-founded), solely ladies may provoke the dialog with heterosexual matches.

This feminine-friendly format was wildly standard for a number of years, however development began to peter out in 2024. Herd stepped down, and her alternative successfully dropped the rule that ladies should message first. This broken — or no less than weakened — Bumble’s distinctive promoting proposition.

The founder returned in March. Since then, Herd says she has been “returning [Bumble] to what makes us trusted, distinctive, and deeply human“.

Begin-up mentality

The information that despatched the inventory up yesterday was that the corporate will lay off practically a 3rd of its world workforce. It will save $40m per 12 months after $13m-$18m in costs are incurred. It is going to reinvest this on product and know-how improvement.

In an e mail to workers, the CEO mentioned this restructuring will assist restore a “start-up mentality…rooted in an possession mindset and group constructions designed for sooner, extra significant execution“.

For the second quarter, Bumble expects income to be $244m-$249m, up from earlier steerage of $235m-$243m. Analysts forecast full-year income of $956m, which might be a year-on-year decline of round 10.8%.

Seeking to subsequent 12 months, there isn’t a lot income development pencilled in, although that is perhaps intentional. Bumble has signalled that it needs to ship “a extra intentional expertise with extra high quality and related matches“.

In different phrases, it sounds just like the agency is concentrated on bettering the consumer expertise somewhat than advertising and marketing for income or consumer development.

Maybe unsurprisingly then, the valuation seems very low-cost. The inventory is buying and selling at 0.6 instances gross sales and 9 instances ahead earnings.

If Bumble manages to regular the ship after which reignite development, the inventory may very well be set for an enormous comeback. It’s nonetheless down 33% over the previous 12 months, even after rebounding 80% since its April low.

Why I’m bearish

Leaving apart the dearth of development, there’s one other basic purpose why I received’t contact the inventory. That is that courting apps simply aren’t that scalable, in my eyes.

In contrast to social media platforms that profit from countless consumer engagement, courting apps are designed to be deleted. As soon as customers discover a match — the entire level of the product, in principle — they typically depart. That makes churn excessive and long-term retention tough. 

What’s extra, many customers are saying that they’re fed up with the ghosting and lack of connection on courting apps. To not point out the unhealthy courting experiences! We see proof of this with Tinder proprietor Match Group, which can be struggling for development. 

I desire to spend money on firms which have highly effective development engines. Sadly, Bumble doesn’t, and that’s a threat. Due to this fact, I’m going to go and search for a greater match for my portfolio.