Bumble Inc (NASDAQ:BMBL) shares plunged more than 26% after the social networking platform projected a decline in paying users and revenue for the first quarter.
The company guided revenue in the range of $242 million and $248 million for Q1, below estimates of $257.2 million.
Management also projected adjusted EBITDA of $60 million to $63 million, implying a 25% margin, a year-over-year drop of approximately 250 basis points.
It also expects paying users to decrease by 100,000 to 120,000, up from a 57,000 decline in Q4. Analysts had expected a 30,000 decline in paid users in Q1.
For Q4, revenue of $261.6 million beat estimates of $260.5 million.
Analysts at Jefferies repeated their ‘Hold’ rating on Bumble and wrote they “await better trends.” They do not believe Bumble has a clear turnaround catalyst.
“Fiscal 2024 was defined by rolling out "Opening Moves" a clear shift in strategy from its core product at launch (women message first). This did little to ignite growth and Bumble ended up reducing its outlook,” they wrote.
“We view this quarter/guidance as similar to the past few, as structural issues to the product remain with a lack of a clear turnaround catalyst.”
They added that Bumble’s executive shake-ups are a clear vote of no confidence from the board but believe this remains a product issue.
“Ecosystem issues were cited as a large driver of the weakness in the Q1 payer numbers and will be a key focus for new management to improve user experience,” they wrote. “We are interested to see if new management can add new innovative experiences to the product.”
They could see improvements stemming from an ecosystem cleanup leading to stronger matches and overall user experience and the launch of new features. Improved experiences should boost word of mouth leading to a stronger topline and lower marketing expenses, they added.
Jefferies has a $7.50 price target on Bumble. Shares traded down 26.5% at $6 late morning on Wednesday.