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At first glance, ideologically progressive dating and social networking app Bumble (BMBL) seems a solid bullish bet. Because of the roughly two years of COVID-19-related lockdowns and mitigation measures, people experienced pent-up demand for several activities previously taken for granted, including getting out and meeting that special someone. Unfortunately, Bumble hasn’t been able to capitalize on this narrative, with BMBL stock significantly hurting this year.
Not helping matters is that Bumble attracted the spotlight for unusual options activity, with traders targeting two put options in Barchart.com’s top 100 list for peculiar dynamics in the derivatives market. On a year-to-date basis, BMBL stock dropped more than 35% of equity value. Since making its public debut, shares plunged almost 70%.
If that wasn’t bad enough, Bumble’s initial offering price stood at $43. At time of writing, shares trade hands for $22.75. Therefore, those seeking justification for bearish trades don’t need to look far.
On the financials, circumstances don’t look particularly rosy either. For instance, Bumble’s balance sheet is rather middling in terms of stability. Currently, the enterprise features an Altman Z-Score of 1.71, which ranks the business in the distressed zone. Per the implications of the gauge, Bumble features a higher-than-normal risk of bankruptcy within the next two years.
Also, its three-year revenue growth rate (on a per-share basis) sits at 7.2%. However, the broader software industry features a median growth rate in the aforementioned period of 7.1%. Therefore, Bumble only ranks slightly better than industry norms while also sporting a negative net margin at the moment.
It’s not an encouraging appearance and the rumblings in the options arena further imposes distractions.
Put Options Light Up for BMBL Stock
Following the close of the Nov. 4 session, BMBL stock as previously stated ranked among the listings of unusual options activity. Specifically, traders targeted the $17.50 puts with an expiration date of Nov. 18, 2022, and the $22.50 puts with the same expiration date.
For the former transaction, volume reached 7,493 contracts against an open interest reading of 104. The bid-ask spread as represented by the midpoint price (32 cents) came out to 15.63%. Regarding the latter, volume reached 9,086 contracts against open interest of 320. Here, the bid-ask spread against the midpoint price ($1.95) came out to 5.13%.
Per data from Barchart.com, the overall sentiment in the options arena for BMBL stock is exceptionally negative. At time of writing, the put/call open interest ratio stands at 2.17. Typically, the delineation between bullish and bearish sentiment is around 0.70, with figures higher than this level indicating that more traders are buying puts than calls.
However, sentiment among Wall Street analysts remain consistently optimistic given the circumstances. Three months ago, experts gave a consensus rating of “moderate buy” for BMBL stock, comprising of five strong buys, one moderate buy and four holds.
In the current month, analyst rate BMBL stock with the same assessment. This time around, the consensus breaks down to seven strong buys, two moderate buys and five holds. Throughout the past three months, no one issued a “sell” (or lower) rating on Bumble.
An Unnecessary Headwind
To be fair to those who may have a contrarian take on BMBL stock, the underlying business encountered unprecedented headwinds. For instance, it’s not the dating app’s fault that inflation skyrocketed, thus reducing the purchasing power of the dollar and imposing pressures on would-be subscribers. As well, Bumble represents a victim of circumstances when it comes to geopolitical flashpoints or global recession risks.
While Bumble gets a pass on certain major headlines that it had nothing to do with, it also took a misstep when it continued to insist that women on its dating platform make the first move. From an ideological standpoint, reasonable people will appreciate Bumble’s efforts to help establish parity between partners in traditionally oriented relationships. However, the insistence that women users spark the initial conversation may limit the company’s total addressable market.
You see, male users seeking traditional relationships probably don’t want to wait around for an indefinite period while hoping to attract a female suitor. This narrative becomes exacerbated when you consider the broad social impact that the COVID-19 crisis imposed. More than likely, male users will gravitate toward competing dating platforms that don’t impose a “waiting period” for gentlemen.
Frankly, the matter doesn’t appear to be a hill that Bumble needs to die on. After all, female dating app users don’t represent a monolithic demographic. Various nuances and complexities exist, including that many women may prefer men to make the first move. Thus, Bumble needlessly stymies certain segments of the female user base.
Unless the company wants to course correct, pessimism toward BMBL stock may continue unabated.
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