Shares of Bumble ( BMBL ) fell more than 35% on Thursday after the online dating apps company came in ahead of Q4 earnings estimates and posted slightly better-than-expected top-line guidance. The post-earnings surge helped BMBL break above its key moving averages (20-day, 50-day, 100-day) today, indicating that bulls are now in control at most times.
However, there is reason to treat these gains as an opportunity to touch Bumble stock, which is now trading at a year-to-date high.
While better than expected, Bumble’s Q4 earnings, nevertheless, represented a 10% year-over-year decline.
Investors should exercise caution while buying BMBL shares at current levels, as the number of paying users on the company’s apps also declined by around 11.5% last year. And while management attributed much of this to a deliberate shift away from low-intent users, the large loss of more than 400,000 paid users suggests that the company’s tech stack 2.0 and AI initiatives have failed to fully offset the shrinking user funnel.
Note that Bumble has a history of ending April with declines of more than 8%, a seasonal trend that makes it even less attractive to own in the near term.
Bank of America Securities maintained its “underperform” rating on Bumble shares after the earnings release and cut its price target to $3.30, indicating a potential downside of 13%.
According to analysts, while the EBITDA beat was impressive, it was largely driven by drastic cost-cutting rather than sustained growth.
BofA expressed concern about the soft dating industry and limited visibility when user growth is really low.
With revenue still down and losses widening, the investment firm remains skeptical that the current tech breakout will hold without a fundamental boost to user acquisition.
Other Wall Street firms, however, do not like Bank of America guarantees on BMBL stock for the next 12 months.
According to Barchart, the consensus rating on Bumble is currently at “Hold”, with an average price target of around $4.48 signaling a potential upside of 20% from here.
