Bumble to a Good Week in Markets
Bumble IPO Shattered Glass
Dating app Bumble (NASDAQ: BMBL) shattered some glass Thursday with its initial public offering that widely exceeded expectations and raised $2.15 billion. Bumble is composed of i) its namesake app, known for a female-first feature that allows women to make the first move, and ii) Badoo, a separate dating app popular in Europe and Africa. The Bumble IPO jumped by double digits to close at $70.31.
Bumble’s board is 70% women, and its management team is over 80% women. CEO Wolfe Herg is the youngest woman ever to take a company public and she is now worth over $1 billion. The truth is the lion’s share of the IPO wealth generated by companies goes to investors (Silicon Valley VCs and private equity firms) - which is dominated by men, and barely trickles to the employees who build the business.
Online Dating is a Huge Market:
Ironically, Match Group, the company behind Match.com, saw its stock soar to an all-time high on Wednesday after it announced a deal to buy Hyperconnect, a South Korean mobile app operator. Shares finished trading up nearly 8%. Bumble is still small compared to Match, which also owns Tindr, OkCupid, and Hinge.
Revenue in the online dating segment is projected to reach US$3 billion in 2021. Revenue is expected to show an annual growth rate (CAGR 2021-2024) of 9.3%, resulting in a projected market volume of $4 billion by 2024. User penetration, pun intended, will be 4.9% in 2021 and is expected to hit 5.7% by 2024.
The point here is that Bumble's market is massive. We are bullish on the stock even though it lost money last year on its way to paying for growth. Seeking love never takes a back seat to economic contraction or expansion.
Still Bargains in the Market Growth Investor?
This Market Isn't Expensive:
All major indexes where up this week, as well as Gold and Oil. There is, however, more and more talk that the stock market is overheated and in need of a correction. We don’t believe it right now. The truth is the stock market is expensive when looked at by most transitional valuation methods like price-earnings ratio and price-earnings-growth.
But there is a notable exception to that statement, the stock market is cheap when looked at with valuation metrics that build interest rates into the calculations; for what it's worth, that is valuation metrics that the US Federal Reserve favors. By most of those measures, the stock market is even cheap here.
Stocks do not exist in a vacuum; they are considered relative to other investments at the time. While the stock market is not at a "backup the truck" bargain price, it still looks better than most other investments in this rock bottom interest rate time. This particular moment is unstable and likely to change soon (let’s hope) so we will constantly reevaluate and adjust as needed. Things can shift quickly when interest rates begin to rise.
Dividend Investor? Lets Start to Watch Inflation:
While it is too soon to call which side will win the tug-of-war between the cyclical inflationary forces and structural deflationary forces, we think it is prudent to plan for the potential of faster price increases than what was experienced in the last decade. Cyclical sectors have historically performed the best when inflation is firming while defensive sectors have lagged. Specifically, the industrials sector has had the highest percentage of positive monthly returns, with materials and energy closely following.
If you're chasing dividends as income investor, companies across sectors that raise their dividends at an above-average rate can help investors stay ahead of the rising cost of living and provide attractive income over the long term. See our favorite dividend stocks.
And that's your one minute weekly market scoop.