On Wednesday, Citi maintained its Buy rating on shares of Bumble Inc. (NASDAQ:BMBL) but reduced the price target to $14.00 from the previous $16.00. The adjustment follows Bumble's announcement of fourth quarter results for 2023 and forward-looking guidance for the first quarter and full year of 2024, which did not meet market expectations. The dating app company's revenue outlook for both the upcoming quarter and the entire year fell short of what analysts had anticipated.
The company's margin outlook for 2024, however, was more positive than expected. This bright spot came after Bumble implemented a significant reduction in force (RIF), cutting its workforce by over 30%. Despite the disappointing financial results, Citi believes that the current valuation of Bumble's stock, which trades at a roughly three-turn discount on enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) compared to Match Group (NASDAQ:MTCH), already accounts for these challenges.
Bumble is currently in the process of revamping its core app, with a major refresh and overhaul aimed at attracting a younger audience set to launch in the second quarter of 2024. This initiative is part of a broader trend among online dating applications, which have been updating their platforms to align with changing user behavior trends in an effort to reignite user growth.
Management has acknowledged product execution challenges as part of the issues faced by the company. Despite the setbacks indicated by the financial outcomes, Citi's stance remains positive on Bumble's stock. The firm's analysts suggest that the company's ongoing efforts to adapt and improve its product may eventually pay off, even though the immediate results have been less than favorable.
InvestingPro Insights
In the wake of Citi's reassessment of Bumble Inc. (NASDAQ:BMBL), investors are keenly observing the company's financial health and market position. According to the latest data from InvestingPro, Bumble's market capitalization stands at $2.48 billion. This valuation comes at a time when the company's price-to-earnings (P/E) ratio is deeply negative, currently at -408.85, reflecting market skepticism about immediate profitability. The adjusted P/E ratio for the last twelve months as of Q3 2023 is marginally higher at 414.2, which suggests that investors are expecting future earnings to improve.
Despite recent setbacks, Bumble's revenue growth remains robust, with a 17.37% increase over the last twelve months as of Q3 2023. This is complemented by a gross profit margin of 71.07%, indicating that the company is able to retain a significant portion of its revenue as gross profit. However, the EBITDA growth has seen a slight decline of -2.12% in the same period. These figures are crucial for investors as they evaluate the company's operational efficiency and its ability to convert revenue into profit.
One of the InvestingPro Tips highlights that Bumble's net income is expected to grow this year, which aligns with the positive margin outlook for 2024 mentioned by Citi. This anticipated growth in net income could be a signal for potential investors that Bumble may be on the path to recovery, despite the recent price target reduction. Additionally, it's worth noting that Bumble operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could offer some financial stability in the short term.
For those looking to delve deeper into the company's prospects, there are additional InvestingPro Tips available that provide further analysis on Bumble's performance and future outlook. For instance, while the stock price movements are quite volatile, analysts predict the company will be profitable this year. Moreover, Bumble does not pay a dividend to shareholders, which could influence investment decisions for those seeking regular income streams from their investments.
Interested readers can find more in-depth analysis and tips by visiting InvestingPro's dedicated page for Bumble at https://www.investing.com/pro/BMBL. There are a total of 9 additional InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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