If a stock has a high level of short interest, it’s typically a red flag. Short sellers are some of the most well-informed investors in the market, and it’s generally not smart to bet against them.
In this report, we are going to look at the short interest data on Bumble Inc (BMBL:US). Bumble is the parent company of Badoo and Bumble – two of the world’s largest dating apps. The company is listed on the Nasdaq and currently has a market capitalization of $7 billion.
Bumble: short interest data
Looking at the short interest data on Bumble, it’s concerning to see that there are a large number of shares on loan currently. At present, 14.56 million BMBL shares are on loan, which represents roughly 20.07% of the free float. By contrast, rival Match has just 2.7% of its free float on loan. This indicates that there is a high level of bearish sentiment towards Bumble stock within the short selling community right now.
What’s even more concerning, however, is that the number of shares on loan has more than doubled since the beginning of June. This tells us that the short sellers have been ramping up their bets here. Research has shown that sharp rises in short interest are often followed by share price weakness, so long investors need to be careful here.
Why are short sellers targeting Bumble?
As for why the short sellers are targeting Bumble, it could be related to the US Supreme Court’s ruling to overturn Roe vs Wade and end the nationwide right to an abortion. This took place on June 24. Over the next few trading days, the number of Bumble shares on loan spiked.
It’s probably also related to the stock’s valuation. For 2022, analysts expect Bumble to generate earnings per share of $0.18. That puts the stock on a forward-looking P/E ratio of about 180 at present. That’s very high. By contrast, rival Match has a P/E of less than 30.
The high US dollar could also be an issue here. This is likely to be a headwind for the company as it generates profits internationally and needs to convert these back into dollars.
Whatever it is the short sellers are focused on here, we think caution is warranted towards the stock. The sharp rise in short interest is a red flag, in our view.