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Bumble (BMBL 0.14%) investors had a good week this week. Shares rose 11% through Thursday trading, according to data provided by S&P Global Market Intelligence, compared to a 1.3% increase in the wider market.
That boost wasn’t enough to put the online dating service specialist into positive territory for the year, though. Shares are down 28% so far in 2022 compared to a 14% decline in the S&P 500.
This week’s rally came as investors turned back toward beaten-down tech stocks.
The main factor driving Bumble’s stock higher was an increase in the wider Nasdaq index that is home to many tech stocks. The index jumped 2.3% through trading on Thursday as Wall Street processed the potential for slowing interest rate increases from the Federal Reserve.
The main fear for investors is that a recession will develop as the Fed raises rates to combat inflation. Bumble, along with many other tech stocks, benefited from a bit more optimism on this point. Executives in early November, after all, cited weakening macroeconomic trends as a growing challenge for the business.
Bumble will be sensitive to overall consumer spending trends in the current quarter and into 2023. The company needs steady growth in both its user base and in average spending per user to keep earnings expanding. That’s why the stock will likely remain volatile as investors process new information about the potential for slowing growth or a recession ahead.
The good news is that Bumble is profitable, with net income reaching 11% of sales in the most recent quarter. Continued success on this score will buffer the stock from big declines, even if growth slows over the next several months.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Bumble. The Motley Fool has a disclosure policy.
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