Very bad news for Bumble and Match Group stocks

Dating apps are in trouble. Bumble (NASDAQ: BMBL) stock price has collapsed by over 22% in 2024 and by over 86% from its all-time high. Similarly, Match Group (NASDAQ: MTCH) share price is down by almost 20% this year and by over 80% from its all-time high. The two companies have shed over $18 billion and $40 billion in market cap.

Match Group stock vs Bumble

User growth is slowing

Bumble and Match Group, the biggest players in the online dating industry, are facing unprecedented challenges as their growth slows. 

The most recent results showed that Bumble’s revenue rose by just 10% in the first quarter to $268 million. Paying users rose by 18% to 2.7 million while its total users in the ecosystem had its first quarterly drop ever.

Match Group, on the other hand, has shed users for six straight quarters. It ended the last quarter with about 10 million paying customers. Its total quarterly revenue rose by about 9% to $880 million. In the past, these companies were used to strong double-digit growth.

The stocks will likely remain under pressure after a recent report found that most young women are staying away from dating apps. Data by Mintel revealed that 47% of men aged between 18 and 34 used dating applications in 2023. In the same period, only 25% of UK women used those platforms.

I also believe that these companies will find it hard to grow their revenues because of their business model. Bumble and Match Group rely on a freemium model, where they provide their applications for free and then charge a cost for advanced features.

Bumble’s premium service lets users get advanced filters, travel mode, backtrack feature, and unlimited swipes. The package costs $19.99 for a week, $39.99 for a month, and $76.99 for three months. A lifetime subscription costs $230.

Match’s Tinder has three premium packages: Tinder+, Tinder Gold, and Tinder Platinum which cost $17.99, $26.99, and $35.99 per month. 

To some extent, it makes sense for people to pay these sums in online dating, especially when they are committed to finding a partner. However, I also believe that most people will cancel their subscriptions either when they find a partner or when they fail to find one. 

To be clear: Tinder and Match Group have their advantages. For one, they are big brands that own tens of dating apps. Match owns Tinder, Hinge, Match, OkCupid, and Plenty of Fish while Bumble owns Fruitz and Badoo. This ownership means that they will maintain their growth albeit at a slower pace.

Is it safe to buy Bumble and Match Group stocks?

The crash of Match Group and Bumble has left significantly undervalued companies. Match Group trades at a forward PE ratio of 13.79 while Bumble has a forward multiple of 13.70. These multiples are lower than the forward S&P 500 PE ratio of over 20.

This undervaluation is a sign that investors are concerned about the companies’ growth and business models. Therefore, I would avoid investing in MTCH and BMB until they return to growth.