We came across a bullish thesis on Bumble Inc. (BMBL) on Substack by Value Investigator. In this article, we will summarize the bulls’ thesis on BMBL. Bumble Inc. (BMBL)’s share was trading at $7.50 as of Jan 24th. BMBL’s trailing and forward P/E were 18.79 and 12.18 respectively according to Yahoo Finance.
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Bumble, a leading online dating platform, stands out with its unique feature requiring women to make the first move after a match. Despite its innovative approach and strong market position, Bumble is trading at an astonishingly low Price-to-Earnings (P/E) ratio of 5.0x based on 2025 expected earnings. This valuation is remarkable for a U.S.-based tech company with global reach, making it an intriguing investment opportunity. Bumble is also highly cash flow generative, evidenced by its aggressive share buyback program, which repurchased $89.7 million worth of shares in Q3 2024—equivalent to 7.6% of its market cap. With $89 million remaining in its buyback authorization and a strong cash position of $252 million, the company is well-equipped to continue reducing its share count. Bumble’s manageable debt load of $618 million further supports its financial flexibility.
The current valuation does not demand growth for investors to see substantial returns. Assuming a fair P/E of 15x, Bumble trades at just one-third of its intrinsic value. Moreover, the company’s aggressive buybacks at this deep discount significantly amplify shareholder value. If Bumble maintains its current pace of buybacks, it could reduce its share count by nearly 50% over three years. A subsequent valuation recovery to a modest 15x P/E could yield a 6x return, with additional upside potential if Bumble returns to growth or achieves a higher multiple.
The narrative of declining interest in online dating is contradicted by data showing Bumble’s resilience. While global searches for “Tinder” have declined, interest in “Bumble” has remained steady, growing its relative mindshare. Bumble owns both the Bumble app, the world’s second most downloaded dating app, and Badoo, ranked fourth globally. These platforms, akin to prime digital real estate, cater to an essential human need, making them difficult to disrupt. As society becomes increasingly digital, dating apps are likely to remain the most efficient way for people to connect.
The recent announcement of Whitney Wolfe Herd’s return as CEO is another positive development. Her leadership, coupled with sound fundamentals, positions Bumble to overcome its steep post-IPO decline. Although the stock has fallen 90% from its 2021 highs, the current setup offers a compelling risk/reward profile. Bumble’s combination of extreme undervaluation, proactive management, and market resilience makes it an attractive opportunity for patient investors seeking outsized returns.
Bumble Inc. (BMBL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held BMBL at the end of the third quarter which was 26 in the previous quarter. While we acknowledge the risk and potential of BMBL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BMBL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.