Editing Bumble
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Swiping Left On Bumble: The Stock Is 63% Overvalued, according to Michele Sanguanini | Swiping Left On Bumble: The Stock Is 63% Overvalued, according to Michele Sanguanini | ||
* The market expects Bumble to ride the online dating trend and overtake Tinder as the most-used dating app. | * The market expects Bumble to ride the online dating trend and overtake Tinder as the most-used dating app. | ||
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* According to the Monte Carlo simulation, Bumble has only a 7.4% probability of being fairly priced currently. | * According to the Monte Carlo simulation, Bumble has only a 7.4% probability of being fairly priced currently. | ||
[[File:Bumble cover image2.jpg]] | [[File:Bumble cover image2.jpg|600px]] | ||
According to Michele Sanguanini's analysis, Bumble (NASDAQ:BMBL) is highly overvalued. To justify the current valuation, the company will need to grow with a compounded annual growth rate of over 35% and reach a 30% operating margin. | According to Michele Sanguanini's analysis, Bumble (NASDAQ:BMBL) is highly overvalued. To justify the current valuation, the company will need to grow with a compounded annual growth rate of over 35% and reach a 30% operating margin. | ||
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Even if pursuing a differentiation focus strategy is a great idea, what makes a difference in a dating app is the number of active users (network effect). Match is clearly winning in both the number of users and paying subscribers. Last year Bumble only added 500,000 new paying subscribers (+25%), while Match increased its paying users by 1,147,000 (+12%). In addition, the company has never succeeded in being a disruptive force, and its growth has been lagging behind that of other, less famous apps. | Even if pursuing a differentiation focus strategy is a great idea, what makes a difference in a dating app is the number of active users (network effect). Match is clearly winning in both the number of users and paying subscribers. Last year Bumble only added 500,000 new paying subscribers (+25%), while Match increased its paying users by 1,147,000 (+12%). In addition, the company has never succeeded in being a disruptive force, and its growth has been lagging behind that of other, less famous apps. | ||
[[File:Bumble's competitors1.png]] | [[File:Bumble's competitors1.png|600px]] | ||
Source: Match Group business overview March 2021 | Source: Match Group business overview March 2021 | ||
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By computing the assumptions above, Michele Sanguanini gets the following free cash flow to the firm: | By computing the assumptions above, Michele Sanguanini gets the following free cash flow to the firm: | ||
[[File:Bumble Free Cash Flow.png]] | [[File:Bumble Free Cash Flow.png|600px]] | ||
Source: Created by the author. | Source: Created by the author. | ||
[[File:Bumble Free Cash Flow2.png]] | [[File:Bumble Free Cash Flow2.png|600px]] | ||
Source: Created by the author. | Source: Created by the author. | ||
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The value created by future growth is 85% of the total value. | The value created by future growth is 85% of the total value. | ||
$ Value % Value | |||
Value of assets in place $442.75 14.82% | |||
Value created by growth $2,545.36 85.18% | |||
==Bumble Montecarlo analysis== | ==Bumble Montecarlo analysis== | ||
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Monte Carlo Distribution | Monte Carlo Distribution | ||
Source: Created by the author. | Source: Created by the author. | ||
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After 1,000 trials, Michele Sanguanini gets a lognormal distribution with a mean of $26.76 and a median of $22.50. | After 1,000 trials, Michele Sanguanini gets a lognormal distribution with a mean of $26.76 and a median of $22.50. | ||
[[File:Bumble lognormal distribution.png | [[File:Bumble lognormal distribution.png|600px] | ||
Source: Created by the author. | Source: Created by the author. | ||
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==Conclusion== | ==Conclusion== | ||
Michele Sanguanini believes that Bumble is highly overpriced right now. He’s convinced that the small probability of being fairly valued represents a good short play as soon as the company starts missing growth expectations. | Michele Sanguanini believes that Bumble is highly overpriced like most of the tech stocks right now. He’s convinced that the small probability of being fairly valued represents a good short play as soon as the company starts missing growth expectations. | ||