2023-03-19 09:08:02 ET
Summary
- The #1 shareholder and the CEO are selling.
- Possibly because the growth days are over.
- The stock isn't cheap despite being near a 52-week low.
Bumble ( BMBL ) stock is a stone's throw from a 52-week low and without some one-time write-downs, the company was near breakeven from an operating profit perspective in Q4.
Seems like now is a good time to buy Bumble shares ... right?
Wrong. Insiders, including the founder/CEO Whitney Wolfe Herd are unloading 13.75M shares - with the option to sell another 2M+.
Curious to say the least, so let's examine what's going on at Bumble to see if there are some opportunities with this stock.
Q4 Earnings
Bumble announced earnings back in February when revenue grew 16% Y/Y and guidance came in line with expectations (more on that later).
A $141M impairment loss bloated tech general and administrative expense line in Q4, otherwise the company was very similar (near break-even) from an operating profit perspective.
Sliding down to cash flows, it got materially worse as Y/Y the company saw operating cash slip from $84.6M down to $51.2M in the quarter. Full year saw a nice improvement, however.
Q1/FY 2023
Bumble gave Q1 revenue guidance of $238M - $243M, the mid-point representing about 14% growth Y/Y. For the full year, Bumble is expecting 16% - 19% revenue growth, putting revenues a shade over $1B at the midpoint.
Wall Street has high expectations for Bumble on the earnings growth side for 2023 with consensus EPS coming in at $0.72 representing 196% growth.
Some items that might improve Bumble earnings this year are F/X has been putting pressure on the international business along with an improvement with the conflict in Ukraine could drive help.
Valuation
There's no doubt that Bumble stock is comparable to its closest rival Match Group ( MTCH ). If an investor wants a piece of the online dating market - these are the two pure-play stocks in that sector.
From an EV/Sales perspective, not surprisingly both are trading at a similar level.
Where Bumble gets a premium valuation is when you look towards earnings. EV/EBITDA might be the cleanest comparison with Bumble trading 2x more than Match Group.
Either way you look, Bumble is not a screaming hot value at the moment. And with growth on the revenue side targeting a Match Group like mid-teens outlook - it's hard to imagine where Bumble is going to find a multiple expansion in shares.
Insiders Selling
As of the end of December, Blackstone held over 43M shares of Bumble, or about 33% of the float.
Last week, Blackstone sold 11.75M shares and CEO Whitney Wolfe Herd sold 2M. Underwriters have another 30 days to secure another 2.06M shares.
Certainly doesn't ring a bell of confidence when the #1 shareholder peels off about 25% of its stake and the CEO dumps 2M shares at the same time.
Conclusions
The timing of the sales by insiders has me concerned that they know the rapid expansion days are over at Bumble. Bumble does generate positive cash flow, largely because of high amounts of stock-based compensation. With strong competitors like Match Group, it's going to be difficult for Bumble to expand margins via price increases meaning multiple expansions might be difficult. One way to expand is using the Match Group playbook of acquiring other apps - and possibly that's why insiders are exiting now because they know dilutive fundraising or acquisitions are likely.
Either way, I'd stay on the sidelines on this one until the valuation actually is cheap enough that upside is possible just by Bumble reaching the target. Right now the shares are expensive by online dating stock standards - which means investors should follow the insiders and sell.
For further details see:
Top Bumble Insiders Are Selling