Deutsche Bank cuts Bumble target to $15, maintains hold

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Deutsche Bank cuts Bumble target to $15, maintains hold
Credit: © Reuters.

On Wednesday, Deutsche Bank (ETR: DBKGn ) adjusted its price target for Bumble Inc. ( NASDAQ :NASDAQ: BMBL ), the parent company of the dating app Bumble, reducing it to $15 from the previous $16, while maintaining a Hold rating on the stock.

The adjustment follows the company's recent earnings call led by the new CEO, Lidiane Jones, who outlined a strategy to revitalize the brand through various initiatives including artificial intelligence-powered features, enhanced safety measures, and a comprehensive rebranding and redesign of the Bumble app.

The bank's decision comes in light of Bumble's lower-than-expected revenue guidance for the first quarter and full year of 2024, particularly noting a slowdown in user growth, especially in the United States. This trend mirrors challenges faced by competitors in the online dating sector.

Despite these concerns, Deutsche Bank recognizes the potential benefits of Bumble's significant restructuring efforts, which included reducing its workforce by more than a third, a move expected to yield savings that would improve the company's EBITDA margin by over 300 basis points, excluding severance charges.

Deutsche Bank also noted the positive implications of Bumble's investment in key business drivers and the possibility of share repurchases. Moreover, uncertainties surrounding the near-term impact of the app's relaunch and ownership changes have prompted a cautious stance from the bank.

The analyst highlighted that while the revised full-year 2024 guidance seems more realistic following the recent recalibration, past experiences with similar turnarounds in the industry suggest that such transitions can be protracted.

In recalculating the price target, Deutsche Bank has shifted its valuation basis from the company's adjusted EBITDA estimates for 2024 to those for 2025. The new $15 price target is based on an 8x multiple of the firm's forecasted adjusted EBITDA for 2025, a reduction from the previous 11x multiple on the 2024 estimates.

The bank's report concludes by reiterating a Hold rating on Bumble's stock, signaling a wait-and-see approach as the company embarks on its rebranding efforts, with the outcome of the app refresh in the second quarter being particularly noteworthy.

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