Bumble stock (NASDAQ:BMBL)

Bumble stock (NASDAQ:BMBL) plummeted sharply on Thursday following the company’s revision of its annual revenue outlook, suggesting that recent changes to its flagship app have failed to stimulate growth. The Austin, Texas-based company announced late Wednesday that it expects 2024 revenue to rise by just 1% to 2% compared to the previous year, down from an earlier forecast of up to 11%. Wall Street projections, based on Bloomberg estimates, had anticipated an 8.4% increase. Additionally, Bumble’s second-quarter results did not meet expectations.

Bumble, which went public in 2021, had already seen its stock hit a record low earlier this year after issuing a weak sales forecast and reducing its workforce by about a third. The company’s difficulties in expanding its user base reflect broader challenges within the U.S. online dating sector, which is still grappling with the aftermath of the pandemic.

Bumble stock dropped by as much as 39% during Thursday’s trading session in New York, marking its largest intraday decline on record. This decline also affected the stock of Match Group Inc., which saw a 2.8% decrease in trading on the same day.

Strategic Shifts and Market Reactions

Bumble’s executives attributed the significantly lowered outlook to a strategic overhaul, which was revealed during a call with analysts on Wednesday. The company plans to invest in creating a better balance of customer experiences and more engaging dating options. Bumble will also adjust its subscription tiers to encourage “positive peer behaviors,” although short-term revenue-generating initiatives, such as expanding the Premium+ offering, will be slowed down. Chief Financial Officer Anuradha B. Subramanian stated that despite the challenging near-term actions, the company remains financially sound as it implements its strategy.

Bumble will also raise the minimum requirements for new user profiles and photos to foster a more “authentic” experience. The company plans to introduce new features, including advanced interest filters, an improved matching algorithm, and an AI-assisted photo picker. Additionally, Bumble is focusing on enhancing its efforts to address problematic behavior on the platform.

The reduced outlook has raised concerns among investors about the company’s future growth trajectory, according to Jamie Lumley, an analyst at Third Bridge. Lumley noted that Bumble needs a clearer long-term strategy to retain talent.

Future Projections and Industry Comparison

Bumble’s forecast for the third-quarter and second-quarter results fell short of expectations. The company anticipates sales between $269 million and $275 million for the current period, below the $296.1 million projected by analysts. Adjusted earnings before interest, taxes, depreciation, and amortization are expected to range from $77 million to $80 million, compared to Wall Street’s estimate of $91.5 million. Revenue for the period ending June 30 increased by 3.4% to $268.6 million, missing the average analyst estimate of $273.2 million. The number of paying users grew by 14.7% to 2.8 million, aligning with Wall Street’s expectations.

In contrast, Match Group Inc., which owns Bumble’s major competitor Tinder, experienced its largest stock increase in nearly two years last week after reporting better-than-expected quarterly results.

Bumble has been undergoing an internal leadership transition since founder Whitney Wolfe Herd announced in November her departure as Chief Executive Officer. The company has since appointed four new C-suite executives tasked with revamping the mobile app to appeal to a younger audience. However, the app redesign appears insufficient to attract younger users or overcome prevailing macroeconomic conditions, according to Chandler Willison, a research analyst at M Science.

Willison suggested that Bumble may be experiencing a slowdown in growth similar to that observed with Tinder as these platforms face increasingly challenging comparisons and potential market saturation. Despite efforts to boost the number of paying users, Bumble’s growth has stalled since late 2021. The introduction of the higher-priced Premium+ subscription tier in December did not yield the expected incremental increase in revenue, as noted by company executives in February.

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