AI And Trust Will Create Safer Digital Connections

Key Takeaways

• Emphasis on user safety, AI-driven personalization, and expanding social discovery features positions Bumble for greater user retention, engagement, and diversified revenue streams.
  
• Operational streamlining, disciplined reinvestment, and direct billing adoption are set to improve margins, cash flow, and long-term earnings scalability.
  
• User quality initiatives and higher investment in AI and product teams pose near-term revenue and margin risks without clear gains in retention, monetization, or competitive differentiation.

Catalysts

Provides online dating and social networking applications in North America, Europe, internationally.

• The company's focus on trust, safety, and "quality over quantity," including robust verification and the removal of low-intent or fraudulent users, positions Bumble to better serve the rising demand for safe, empowering online spaces-likely supporting increased user retention, higher ARPPU, and long-term revenue growth as societal norms around digital relationships strengthen.
  
• AI-driven personalization, coaching, and a rebuilt, sophisticated tech infrastructure are expected to deliver better matching and user experience, appealing to Gen Z and Millennial users who seek authentic connections, which should drive conversion rates for paid subscriptions and improve the company's long-term earnings scalability.
  
• The expansion of adjacent offerings like Bumble BFF and Bizz, particularly with tailored group/community features for friendship and networking, taps into the growing need for digital social discovery beyond romantic relationships, enabling revenue diversification and supporting user engagement and lower churn-contributing to future top-line growth.
  
• Streamlined operations, workforce reduction, and a shift to more efficient, organic marketing have already produced record EBITDA margins, and continued operational discipline with selective reinvestment in core technology and AI is expected to drive sustainable margin expansion and robust free cash flow.
  
• The successful rollout and adoption of alternative direct billing (bypassing App Store fees) could further enhance gross margins-even if headline revenue growth appears soft-by capturing a greater share of payment revenue and improving underlying profit metrics.

Bumble Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bumble's revenue will decrease by 3.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from -82.5% today to 15.5% in 3 years time.
• Analysts expect earnings to reach $142.1 million (and earnings per share of $1.09) by about August 2028, up from $-850.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $258.4 million in earnings, and the most bearish expecting $96.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.5x on those 2028 earnings, up from -0.9x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 13.6x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.73%, as per the Simply Wall St company report.

Bumble Future Earnings Per Share Growth

Risks

• The company's deliberate removal of lower-quality and lower-value users, combined with new trust and safety features (e.g., mandatory verification), is causing near-term and potentially ongoing attrition of its paying user base, which may result in persistent headwinds to revenue growth if these initiatives don't quickly translate into higher long-term retention and monetization among "approved" users.
  
• The shift from performance-driven marketing to organic and brand-focused strategies reduces customer acquisition costs in the short run, but may limit the company's ability to efficiently scale or regain lost user volume, posing a risk to revenue and potentially stalling user growth relative to aggressive competitors willing to spend on acquisition.
  
• There is heavy reliance on successful execution of AI-driven personalization, product improvements, and the migration to a new tech stack for future monetization and engagement; delays, missteps, or underwhelming outcomes here may lead to user fatigue, increased churn, and caps on average revenue per paying user (ARPPU), ultimately impacting both revenue and margin expansion.
  
• Increased investments in product, engineering, and AI talent-despite recent cost-cutting-may drive up operating expenses over time; if top-line growth or margin gains from these investments fail to materialize quickly, net margins and earnings could face sustained pressure, especially as competition and market saturation persist.
  
• The company's guidance reflects ongoing year-over-year declines in revenue ("expect total Bumble Inc. revenue between $240 million and $248 million, representing a year-over-year decrease of 12% to 9%," with similar declines for the core app) and possible reporting headwinds from discounted direct billing (lowering reported revenue), raising concerns about ability to return to durable top-line growth and improve financial optics in a consolidating and competitive sector.

Valuation

• The analysts have a consensus price target of $6.707 for Bumble based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $914.2 million, earnings will come to $142.1 million, and it would be trading on a PE ratio of 7.5x, assuming you use a discount rate of 9.7%.
  
• Given the current share price of $7.15, the analyst price target of $6.71 is 6.6% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.