BofA Securities analyst Curtis Nagle reiterated an Underperform rating on Bumble Inc (NASDAQ:BMBL) with a price target of $5.75, up from $5.50.

In its third quarter, Bumble surpassed earnings expectations due to efficiency improvements in operational expenses (OPEX). The company reported revenue of $273.6 million, which aligns with guidance and is just above analyst expectations of $271.7 million.

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Adjusted EBITDA came in at $82.6 million, outperforming projections of $78.8 million. However, the Bumble app’s revenue showed a 1% year-over-year decline, and the Average Revenue Per Paying User (ARPPU) decreased by 10% to $25.58 due to a shift toward international markets. Both metrics aligned with expectations.

For Badoo, paying users rose 14% year-over-year, exceeding the previous quarter’s 12% increase. The app’s adjusted revenue structure led to improved conversion rates, and net new Badoo users reached 65,000, well above the 17,000 expected by analysts.

Bumble’s adjusted EBITDA margin reached 30%, up 290 basis points year-over-year and slightly ahead of the Street’s projection of 29%, driven by OPEX leverage in general and administrative areas and shifts in sales and marketing costs towards the fourth quarter.

During the quarter, Bumble also repurchased $90 million of its stock, adding another $30 million in October, amounting to about 140% of free cash flow.

Bumble’s guidance for the fourth quarter places revenue at $259 million at the midpoint, aligning with analysts’ forecasts, and EBITDA at $72 million, slightly below the Street’s $74 million expectation.

The company reaffirmed its fiscal 2024 revenue outlook of $1.069 billion at the midpoint, suggesting a 1.6% year-over-year growth in line with estimates.

Bumble anticipates at least a 200-basis-point improvement in annual EBITDA growth. Management highlighted recent app enhancements, including new interest filters and expanded “opening move” tools, with a broader product roadmap for fiscal 2025 to be unveiled in early 2024.

Nagle adjusted his estimates slightly upwards for 2024 based on stronger-than-expected OPEX efficiencies. His revenue projection for the fourth quarter increased to $261 million from $259 million, maintaining an EBITDA margin of 27.8%. For 2024, he raised revenue expectations to $1.071 billion from $1.066 billion, marking a 2% year-over-year increase. Adjusted EBITDA projected at $304.2 million, up from $299.4 million, resulting in a margin improvement to 28.4%.

Nagle expresses caution on Bumble’s outlook, noting that growth in paying users will likely take time to recover, given macroeconomic pressures and ongoing product investments.

Potential increases in marketing, product development, and workforce investments could impact margins if revenue is within expectations. Nagle raised the price target to $5.75 (up from $5.50), applying a 4.3 times 2025 EV/EBITDA multiple, which remains at a discount to subscription-based service peers trading at 17.2 times.

Despite Bumble’s higher margins, Nagle believes the discount is justified due to slower user growth trends and high private equity sponsor ownership.

Price Action: BMBL stock is up 10.20% at $8.90 at last check Monday.

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