11:15 AM EDT, 08/08/2024 (MT Newswires) -- Bumble (BMBL) is taking a risk by sacrificing short-term revenue and profits to invest in improving the user experience in hopes to kickstart user growth again, Morgan Stanley said in a note Thursday.

Analysts said the company has been struggling with user growth in the US recently since its efforts to boost user numbers didn't work, so it is now focusing on improving the experience for free users. This shift means Bumble is spending less on making money, which is hurting its financial results in the short term.

The online dating app expects revenue to decline in Q3 for the first time, has lowered its revenue growth forecast for the year, and expects its profit margins to drop slightly. Bumble hopes these changes will improve its product and user growth over time, but it hasn't provided details on how long this will take or how much it will help, the analysts said.

"We believe the high uncertainty and requirement for strong execution will likely weigh on Bumble's multiple until it can prove the new strategy will lead to better user trends," the analysts added.

The analysts said they expect Bumble's revenue growth to slow down for the rest of 2024 and continue to decline in 2025, before picking up to a 4% increase in 2026.

Morgan Stanley slashed the price target on the company to $6 from $12 while keeping its equalweight rating. Shares of Bumble were 32% down in recent trading activity.

Price: 5.49, Change: -2.57, Percent Change: -31.90