Bumble IPO Stock Price Could Double
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Hot dating app Bumble (BMBL) plans to go public as soon as next week at a projected $28 to $30 a share, but Susquehanna Financial Group estimates the company could be worth roughly twice that in a best-case scenario.
“While we do not offer pre-IPO ratings, we believe the valuation range is very reasonably priced and wouldn’t be surprised to see it move higher,” Susquehanna’s Shyam Patil wrote Thursday in a research note.
Founded in 2014 by female ex-Tinder executive Whitney Wolfe Herd, Bumble aims to protect women from the harassment that many find on traditional dating sites by requiring females to contact men first in hetero dating situations. The company is also trying to expand beyond dating through its Bumble BFF platform for promoting friendships and a Bumble Bizz professional-networking tool.
BMBL said Tuesday in its S-1 initial public offering filing that it plans to sell 34.5M shares of Class A stock that will trade on the Nasdaq. Bumble will also make another roughly 5.2M shares available to underwriters for overallotments.
The company expects to raise as much as $1.1 billion if the offering prices at a midpoint of $29 a share and underwriters exercise all overallotments. Bumble intends to use the proceeds to buy some pre-IPO investors’ shares and pay off about $200 million of debt and $21.3 million of underwriting expenses, leaving $111.1 million for general corporate purposes. Analysts estimate the offering will value Bumble at about $6.5 billion to $6.8 billion.
BMBL said in its S-1 that it lost some $84 million during 2020’s first nine months on $376.6 million of revenue. However, Patil compared Bumble’s financials to that of publicly traded competitor Match Group (NASDAQ:MTCH) and estimated that BMBL’s value could nonetheless significantly exceed the company’s $28-$30 expected offering price.
“With MTCH already trading publicly, valuation should be merely an exercise of deciding whether BMBL deserves a premium or discount, and the magnitude of such,” the analyst wrote.
Patil found that while Match and its key subsidiary Tinder are larger than Bumble on most measures, BMBL nonetheless stacks up well on many data points.
For example, while Bumble’s average revenue per user fell 3% year on year during 2020’s first nine months even as Match’s rose 3%, BMBL still had the larger ARPU overall. Thanks to a larger focus on wealthier countries, Bumble saw $18.48 in average revenue per user during the period, while MTCH only took in $17.91.
Similarly, Bumble saw total revenues grow 15% during 2020’s first nine months to $417 million – roughly equal to Match’s 16% gain, although MTCH’s sales came in at a much larger $1.74B.
Patil used those numbers and Match’s current valuation to calculate Bumble’s fair value relative to both revenues and EBITDA. On those measures, he estimated BMBL stock should be worth $19 a share in a worst-case scenario and $59 a share in a best-case one. The $59-a-share value is more than double the expected price range’s $29 midpoint.
However, even Patil’s mid-case scenario puts the stock’s fair value at $34 to $45 a share, and $40 per share in the dead middle. That’s 33.3% to 42.9% above the IPO’s $28-to-$30 expected price range.
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