Short Position: Bumble Inc ($BMBL)
NOTE: These are just thoughts. They aren’t financial advices. I haven’t decided whether to commit to a short position on Bumble but likely will take one soon.
Recently closed a short position on BYND 0.00%↑ that I’ve had for 7 or so months at 10/share. Should’ve closed it earlier in December 2022 at around 11/share and pushed hard into META 0.00%↑ at 120/share (currently at 240/share).
Oh well, still made 60% or so.
Had a nice dinner at a vegetarian restaurant to celebrate
Although I think we may be on the cusp of a general bull run, I want to short again, this time looking at BMBL 0.00%↑ .
Bumble Inc IPO’d in Feb 2021, and the stock has already decreased ~80% since then. So I’m a bit late to the party, but I think the stock is still overvalued in comparison to competitors and that the future outlook is no good.
Comparables:
(Please bear in mind metrics may differ from source to source.)
Match Group MTCH 0.00%↑
Market Cap: 8.7B
Revenue Multiple: 2.73x
P/E Multiple: 12x (wow actually profitable)
Match Group is the largest online dating service in the game, owning many brands including Tinder and Plenty of Fish. They have much greater operational experience (relative to Bumble) and can pivot as the industry evolves, either by acquisition or by leveraging their many brands and deep position in the market.
They actually look undervalued after going bananas in Q2 2021 to a share price of 160/share, and then gradually plummeting down to what is now 31/share.
Snapchat SNAP 0.00%↑
Market Cap: 14.1B
Revenue Multiple: 3x
P/E Multiple: -10x
While not technically a dating app, Snapchat is most similar to Bumble among all social media platforms.
No profitability in sight. It’s still not proven if these social media platforms can deliver profitability at without tremendous economies-of-scale.
Cash situation looks fine (1.4B).
Hello Group MOMO 0.00%↑
Market Cap: 1.7B
Revenue Multiple: 0.9x
P/E Multiple: 8.5x
Hello Group operates TanTan, the most popular dating app in China. TanTan is ubiquitous but not strong enough to be consider a true powerhouse tech company in China. Hard to say with how the market values these non-giant Chinese companies.
Not sure of this ListCo’s history, but share price was once at 54/share back in 2018.
Grindr GRND 0.00%↑
Market Cap: 1.1B
Revenue Multiple: 5.1x
P/E Multiple: -90x
The OG dating app, geared towards the LGBTQ community. Was likely a SPAC play back in November 2022, when price shot up to 36.5/share, now at 6.26/share and very stable over the past few months with limited liquidity.
Grindr is close to profitability but cash position looks very rough at 9M.
Definitely another short target. I don’t think it will have the support in the market to get the cash injection it needs, nor do I think the future outlook is too good.
Bumble Deep Dive
Market Cap: 5.4B
Revenue Multiple: 6x
P/E Multiple: -68x
While not as bad as SnapChat, Bumble is currently nowhere near profitability. It claims to have had great profitability in 2021, but this is likely the product of financial engineering before IPO.
Revenue multiple is not as bad as I thought.
Cash position at 400M is not bad.
Future Outlook
The dating industry changes rapidly, and people get bored fast. Brand value exists but also drops off quite rapidly. The utilities of dating apps are minimal; up-selling to its user base doesn’t really work; its users know what they want, and their wants are subject to change rapidly.
It’s similar to the clubbing industry, where brand names exists, but people get bored quickly. This is why a club operator will often re-invent the same club in its entirety (i.e. changes the name) for the purposes of retaining the same user base.
This is why Match works. It owns a portfolio of brands, has proven its ability to integrate these brands with their experienced operators, and has reached great profitability. It has the firepower to continue its strategy of acquisition and integration.
Bumble and Grindr are likely already boring to their respective target audience. Do they have the ability to evolve or acquire? Grindr, no. Bumble? Perhaps.
Bumble is to Tinder what Lyft is to Uber: it’s softer and lacks the depth to go global. There is no “international market” play for Bumble, and Bumble has already reached peak awareness in America. Where is the growth market?
Its only serious acquisition target is Coffee Meets Bagel. It won’t work; Coffee Meets Bagel is certainly going to IPO itself given its bloated valuation and professional investor base. Plus, CMB is likely a better product than Bumble with more global reach. What’s in it for CMB?
I also definitely don’t see Bumble having the skills to make overseas acquisitions.
So, yeah, Bumble is certainly on its way out, but has the cash to survive another 4 years or so. Grindr, not so much.
Conclusion
Will short both GRND 0.00%↑ and BMBL 0.00%↑
Will consider long MTCH 0.00%↑
No target price in mind for now.
