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While the coronavirus completely changed our way of life this year, something that didn't go out of style was online dating. Young adults have had to go months without a night life this year. As result, they've taken to dating digitally.
You see, Bumble has been one of the winners of this post-pandemic economy.
Statista reported 31% of dating app users responded to an April 2020 poll saying they were using the app more than normal. This made sense with the lockdowns.
Later, when lockdown restrictions loosened, Bloomberg shed some light on the dating world. One person was quoted saying, "We hugged at the end... the hug made me kind of nervous."
This is dating in 2020. People are worried. They will continue to experiment with new ways to get to know each other without spreading disease. And it will not be surprising if we see dating become further and further digitized.
For companies like Bumble, this is fertile ground, which is probably why we're hearing about the Bumble IPO today.
But is the Bumble IPO worth investing in?
What Is Bumble?
Many have heard of Tinder and Match.com. The premise is essentially that you create a dating profile, an algorithm gives you a list of potential partners, and you decide if you want to "match" with them or not.
Bumble is the same. But different dating apps have different spins on the process. What makes Bumble unique is that it exclusively lets women make the "first move."
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While that sounds like it might only cater to half the population, Bumble has been one of the most successful dating apps on the market. It's the second most popular dating app, behind Tinder.
Statista numbers it second to Tinder in audience size. As of September 2019, Tinder has over 7 million users, while Bumble has just over 5 million.
The app is known for a smooth interface and a secure user experience.
Here's why the chance to invest in Bumble has investors excited, including whether you should buy at the IPO...
Is Bumble Profitable?
Bumble is eyeing a valuation of $6 billion to $8 billion when it IPOs in 2021. While anything can happen between now and then, Bumble's past performance looks promising on paper...
Bumble netted $86.6 million in revenue for 2018. That was up from just $5 million in 2016. That was 1,632% growth in just two years.
Yes, Bumble was also profitable that year. It took in $31.1 million, up from a loss of $4.9 million in 2016.
Not bad for a six-year-old company, founded in 2014.
Of course, as Bumble nears its IPO, more recent financials will be released. There is no official Bumble IPO date yet.
What we know now is simply that Bumble is one of the top dating apps on the market and has a good chance of picking up steam as digital dating is cemented into the culture.
Meanwhile, COVID-19 could accelerate that. Match Group Inc. (NASDAQ: MTCH), the company behind Match.com, is up 121% since stocks crashed March. And it's up 44% for the year.
This is a very real, potentially profitable trend. But here's something to consider before you go IPO investing...
Should You Invest in Bumble IPO?
IPOs can be very exciting. And they can be extremely profitable with the right stock. But excitement isn't always the best thing for IPO investors.
You see, excitement can often inflate the stock price. Shortly after the IPO, many stocks have seen a sharp downturn once the excitement died down. This happened with Lyft Inc. (NASDAQ: LYFT) in 2019, as it tumbled from $78 to just $28, a 64% loss.
Bumble has concerns similar to the digital ride-hailing service. It faces competition from a pool of other successful apps, namely Tinder and Match.com.
These companies are all just starting to get their footing in the $3 billion online dating market - sure to grow quickly over the next few years. While Bumble is one of the top names, this can change in an instant, with how little is known about the online dating industry.
Compare that to Lyft's battle with Uber Technologies Inc. (NYSE: UBER). The companies have been engaged in a price war that tanked both of their stocks about the same percentage (Uber has lost 19% since May 2019). COVID-19 has not helped either stock.
What's more, online dating could even be a shakier trend than ride-hailing. There are fewer variables involved in calling a cab than, you know, love.
So before investing in any Bumble IPO, you will want to wait for a clearer financial picture of the company and the industry.
If you're excited about the stock, wait a few weeks after the IPO to let the dust settle before buying in. That way you can avoid a potential loss if the hype winds down while also getting a clear idea about how Wall Street values the stock.
Or, you could avoid the unknowns altogether and buy stocks that are already public...
Three Stocks Even Better Than Bumble
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.