What Happened:
Shares of online dating app Bumble (NASDAQ:BMBL) fell 5.24% in the afternoon session after Netflix and Tesla's earnings results led to weakness in tech today, with investors possibly taking profits on winners. Specifically, Netflix missed on revenue, driven by weaker revenue per subscriber, and also guided to Q3 revenue below expectations. The much-awaited topline tailwind from advertising revenue is not helping yet, which also added to the disappointment. With the stock up 60+% year-to-date heading into earnings, the market was clearly expecting a lot and pricing in a lot of good news.
Additionally, Tesla reported weaker-than-expected operating margins and free cash flow, and vehicle production will slow in Q3 due to factory shutdowns for maintenance and improvement. CEO Musk mentioned that Tesla could cut prices if economic conditions deteriorated and cited an uncertain macro backdrop a few times during the earnings call. With well over half of companies that have reported Q2 earnings thus far showing better-than-expected results, this commentary was worrisome. Lastly, Tesla stock had even more good news priced in, having headed into earnings up well over 100% year-to-date.
The Nasdaq index was up roughly 35% year-to-date as of yesterday. There are many software, internet, and general tech names up 50% or more year-to-date, so today's results from Netflix and Tesla were probably a splash of cold water, causing some to reign back near-term expectations or to take profits and realize some gains more than halfway through calendar 2023. Note that today's S&P 500's performance (down much less than the Nasdaq) and the Dow's performance (actually up on the day) further support the narrative that it is specifically tech stocks being impacted today.
What is the market telling us:
Bumble's shares are a little volatile and over the last year have had 45 moves greater than 5%. The previous big move was 3 months ago, when the stock dropped 7.31% on the news that the company reported first-quarter results that narrowly topped analysts' revenue, paying users, and earnings per share (EPS) estimates, but missed on free cash flow. Revenue and adjusted EBITDA guidance for the next quarter were below Consensus. Despite this, management remained optimistic, stating that "the momentum in the business sets the company up to continue delivering profitable growth."
Finally, it is worth calling out that sentiment and expectations were lowered going into the quarter, as BMBL provided an intra-quarter filing related to a secondary offering that dampened enthusiasm around payers. Therefore, while this was a mixed quarter, it was 'better-than-feared.'
Bumble is down 4.35% since the beginning of the year, and at $19.55 per share it is trading 48.4% below its 52-week high of $37.92 from July 2022. Investors who bought $1,000 worth of Bumble's shares at the IPO in February 2021 would now be looking at an investment worth $278.05.
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