Bumble Stock Forecast
This year hasn’t seen too many top-tier tech initial public offerings (IPOs), but one of the more exciting ones on the way is Bumble Trading Inc. The Bumble IPO was supposed to land before 2019 (although that is looking increasingly unlikely). Whenever Bumble stock does hit the markets, however, I could see it being a top tech stock in 2019.
First, let’s take an overview of the market.
Despite having a disappointing year in 2018, tech still dominates. Investors are eager for the next big app that will disrupt so-and-so industry and lead to massive gains in short periods of time.
That way of thinking is not dead and, frankly, it shouldn’t be. There’s still a ton of potential locked away in many tech stocks (and in tech companies looking to go public).
Uber Technologies Inc. is one of the most exciting tech companies around, and it has a pre-IPO valuation of $120.0 billion by some estimates. In other words, tech is still dominant and is still what gets investors’ hearts pumping.
While the Bumble IPO isn’t quite on that level, the company is still full of potential, especially considering what its valuation will be at the time of the IPO.
The company is said to be currently seeking a $1.5-billion IPO. Some have placed the value as low as $1.1 billion, with that disparity in value partly being to blame for the fluid Bumble IPO date. (Source: “IPO Could Value Tinder Rival Bumble at $1.1 Billion,” Bloomberg, November 5, 2018.)
That valuation could change, since the company is exploring new ways to monetize, namely through advertising. Bumble currently operates on a subscription-based model, but 2019 is likely to see a shift in the way the company makes its money.
Moreover, if Bumble settles for a lower valuation at the time of its IPO, then expect to see a rush of investors toward the stock. After all, the cheaper that the stock is on release, the better for investors who get in early.
One of the reasons I’m so high on the Bumble IPO is that the company has a lot of room for growth and has shown an impressive ability to expand. Since February 2017, the company’s user numbers have jumped from 12.5 million to 40 million.
The app targets a lucrative demographic, with 72% of its users being under the age of 35, and more than 91% of users over the age of 22 holding at least a bachelor’s degree.
Worth noting is that, in 2017, the average Bumble user spent 100 minutes a day on the app. This means there’s a huge pool of potential consumers for advertisers to tap into, making the Bumble IPO that much more enticing if the company goes ahead with its plans to integrate ads. (Source: “8 Things You Need To Know About Bumble For Valentine’s Day,” Forbes, February 13, 2017.)
“We are at our annual run rate of $200 million for 2018, and we’re only in year three, ” said Bumble CEO Whitney Wolfe Herd. “We’ve been a profitable business since year two.” (Source: “Dating App Bumble Sets Sights on IPO as It Presses Its $400 Million Lawsuit Against Match,” CNBC, September 25, 2018.)
This shows a strong business model with tangible strategies that could push revenue higher without sacrificing growth.
It’s worth comparing the Bumble stock forecast with that of Snap Inc (NYSE:SNAP). I covered the SNAP stock IPO, and I was very skeptical of it then. And later I was proven right.
Snap stinks; we’ve seen the company lose tons of value in 2018. The problem with Snap is that it had all these users but no credible way to make money off them.
Basically, Snap was sold on its user growth alone—revenue would come later. Except it never did. In fact, user growth began to slow, leading to the stock’s collapse.
Bumble, however, has both of those bases covered.
As previously mentioned, ad revenue could play a big part in the future of Bumble, alongside its subscription model. In both cases, there’s a way to grow the company’s revenue.
On the second front, growth, Bumble has only begun to realize its potential; the company is now focused international expansion.
With a focus mainly on English-speaking countries so far, Bumble has made successful entries into Germany and Mexico. It’s now also looking to aggressively pursue other international markets, including the remainder of Europe, Asia, and Latin America.
Furthermore, Bumble is preparing to enter India, which is home to hundreds of millions of potential users.
Not to mention that, with its female-centered approach, Bumble could find a warm welcome in India, considering that the country has faced a reckoning as of late, due to its gendered violence.
So, the company has both a plan to grow its user base and increase its revenue for years to come, making it a very exciting tech stock in 2019.
Bumble IPO Lawsuit
There is one hitch that we should cover now: the company’s legal battle with its main rival, Match Group Inc (NASDAQ:MTCH).
Match, owner of “Tinder” and a variety of other dating apps, has a deep connection with Bumble. After all, Herd, a co-founder of Tinder, is now the CEO of Bumble.
Herd left Tinder in 2014 to start Bumble. Match then sued the company, claiming that it violated trademarks and patents, while also accusing Bumble of abusing trade secrets. (Source: Ibid.)
Bumble fired back with a countersuit for $400.0 million. That lawsuit alleges that Match Group interfered with Bumble by requesting that Bumble provide confidential information, using the pursuit of a purchase as a pretense.
“Match was unable to acquire us successfully, and they then filed a baseless lawsuit on our company and we are going to vigorously defend that in the court,” said Herd. “And we have the resources—the capital, the intellectual capital—to pursue this vigorously.” (Source: Ibid.)
According to a spokesperson for Match,
Our statement on this lawsuit is the same today as it was six months ago: we obviously think this has no substance. To our knowledge, Bumble still has not served us. However, we understand their desire to distract from ongoing, actual litigation, regarding their misappropriation of trade secrets and infringing on our intellectual property. Bumble is required to file a response to our original claims next week and we look forward to proving these in court.
The result is that both parties are now embroiled in legal battles, the resolution of which is yet to be determined.
While there’s little fallout likely from the lawsuit, the worst-case scenario could hurt the Bumble IPO and the Bumble stock forecast.
In my view, the Bumble stock forecast is so positive because it’s side-stepping a lot of the common pitfalls that plague app-based IPOs.
The company has a strong user base and strategies to grow it for years to come. Bumble also has a number of tools to create revenue.
Both factors mean that Bumble stock growth could continue apace for years. In that case, the Bumble IPO could be one of the strongest IPOs in the tech sector, with the potential for 30%–50% gains in a short period.