The Bumble (NASDAQ:BMBL) initial public offering (IPO) generated considerable buzz on February 11 when it debuted on the NASDAQ stock exchange in New York. That’s because it brought with it the world’s youngest ever female CEO to take a company public. And the Bumble share price soared, opening publicly at $76, after debuting at $43 the day before. This gave it a market cap valuation of $13bn (£9.4bn). Bumble’s share price peaked at $79, but has since fallen below $72. So does this US stock look like something I should consider investing in?
Should I invest in Bumble stock?
Bumble is a social networking platform that consists of a dating app, business networking arm (Bumble Bizz) and space to make friendships (Bumble BFF). The company also owns dating app Badoo and UK gay dating app Chappy through a recent acquisition.
There are a few things I look for in a company before buying shares as a long-term investment. Leadership is one of those, along with a competitive edge and room for growth.
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I’m impressed by the leadership publicly presented by Bumble CEO Whitney Wolfe Herd and her team. I think it’s always good to see strong leadership and a sense of true ownership of a company. And it seems to me that the 31-year-old founder clearly represents this attitude.
I also think it’s important to understand a business model if I’m going to invest in it. While I understand what Bumble is, I don’t know that it’s got enough of a distinctive difference from its competition. It’s got the dating app, which is unique in that “women make the first move”. This is designed to encourage a safe and respectful dating experience devoid of abuse and intimidation. It’s certainly a welcome change from some of the seedier offerings available. However, is it enough to maintain its edge?
Highly competitive space
The dating space is evergreen because there are always people looking for love. Therefore, it can hold up well in a recession. However, it’s quite saturated and I get the impression users are easily bored, jumping from one app to another with ease. I don’t think it would take much for a new contender to arrive on the scene and steal its thunder. Especially considering how far Bumble has come in just seven years.
Match Group is Bumble’s chief competitor, but I find it concerning that the two companies have been involved in legal tangles in the past. Hopefully that’s behind them now, but management in these high-profile firms seems to comprise a fairly small pool of people. Burning bridges between them so early on, may not bode well for the future.
Those added extras, being able to network and socialise in a platonic way, mean Bumble might keep users for a lot longer than competitors that only offer the dating option. However, those features are arguably in competition with Microsoft-owned LinkedIn and Facebook.
I like the story behind the business and can see room for growth. But its early days, and for now, I’m not tempted to invest in Bumble shares. I’ll keep it on my watch list and see how it goes.
