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While the COVID-19 pandemic has been incredibly stressful, the crisis imposed acute pressures on singles. Suddenly isolated from everyone when the mysterious SARS-CoV-2 virus capsized society, loneliness became a constant struggle. However, with the sharp reduction in COVID-related mitigation measures, the narrative moving forward should be positive for dating apps and services like Bumble (BMBL). However, the reality of BMBL stock may clash with its desired storyline.
To be fair, current enthusiasm for Bumble rings high. Since the January opener this year, BMBL stock gained over 28% of equity value. Further, momentum doesn’t appear to be fading anytime soon. For instance, in the trailing five sessions, shares gained slightly over 5%. Plus, from the recent bottom on Jan. 6, Bumble soared over 34%.
As well, market analysts have weighed in on BMBL stock and while many carry a pensive approach to the underlying enterprise, a few stand out as believers. For instance, KeyBanc’s Justin Patterson upgraded BMBL to “buy,” noting that Bumble shares can continue to rise (by a magnitude of double digits) as consumers turn to online dating.
Patterson hasn’t been wrong about that. Therefore, it might seem risky for bearish traders to target BMBL stock.
However, prospective investors can’t ignore the overwhelming volatility that the dating and social networking app incurred. In the trailing year, shares dipped over 12%. Since the company’s first public session, its market value plunged more than 65%. Frankly, you don’t lose that much out of your company without a reason.
To be sure, Bumble entered the public fray at a tricky time, particularly for a business that depends on social interactions. Thus, the sharp losses may be understandable to some extent. However, with the lifting of COVID restrictions, BMBL stock should really fly (like casino stocks did) because of the incredibly positive implications.
It’s moving but arguably not enough, which raises eyebrows because of the latest rumblings in the derivatives market.
Bearish Traders Take an Interest in BMBL Stock
After the closing bell rang out for the Feb. 1 session, BMBL stock became one of the highlights for unusual stock options volume. Reflecting the difference between the current volume and the average volume over the past month, this screener pinpoints aberrant activity compared to normal levels.
Specifically for Bumble, total volume reached 9,947 contracts against an open interest reading of 89,553. Compared against the average one-month volume level, the difference to the current session came out to 74.63%. Drilling into the details, call volume hit 1,367 contracts while put volume pinged at 8,580. This makes for a put/call volume ratio of 6.28.
At time of writing, Barchart.com notes that Bumble’s put/call open interest ratio stands at 3.26. Mathematically, a 1:1 ratio indicates even sentiment between bulls and bears. However, because the broader market features an upward bias, investors typically use 0.70 as a level to delineate between optimism and pessimism. At the moment, then, traders are piling aggressively into put options than calls, generally symbolizing bearish sentiment.
However, the Barchart Technical Opinion currently rates BMBL stock as an 8% buy. Obviously, it’s not the most confidence-inspiring rating but it reflects brewing belief in the present momentum. As well, Wall Street analysts seem to appreciate Bumble’s potential.
Three months ago, market experts pegged BMBL stock as a consensus “moderate buy,” breaking down as seven strong buys, two moderate buys and five holds. In the current month, the assessment remains the same. However, the individual breakdown now includes two additional strong buy ratings.
To summarize, traders appear to be taking the pessimistic approach while Wall Street’s brightest apparently see a discounted opportunity. Which way should investors go?
Watch the Layoffs
While critics of BMBL stock have no shortage of material – from the poor market performance to the less-than-ideal financials – it’s the rising number of layoffs that should worry stakeholders. We’re not just talking about low-pay throwaway jobs. No, these are excellent, life altering, career-building opportunities that recently got the axe.
Over time, this fundamental headwind will translate to a lower total addressable market for Bumble. Let’s face reality – superficiality undergirds all dating apps. Because it’s so easy to approach singles online, the lowered barrier to entry means that competition among prospective lovebirds is intense. And in the online dating world, nothing can kill your chances than having no job.
Further, if earlier recession fears ring true, then the recently unemployed will have an even more difficult time finding a job. Even if they succeed, their new position may pay lower based on contemporary economic realities. Again, over time, this circumstance should eat away at Bumble’s relevance. Therefore, the bears might have a point regarding BMBL stock.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.