What Happened:
Shares of neighborhood social network Nextdoor (NYSE:KIND) fell 5.5% in the morning session after the company reported third quarter results with revenue falling below Wall Street's estimates, driven by a miss in Total Weekly Active Users (WAU), a key measure of volumes. Adjusted EBITDA was in line. Management attributed the weak results to tough macroeconomic conditions and reduced advertiser budgets, especially affecting those in the home-related spending category since Q2 of 2022 and ongoing.
Additionally, during the earnings call, Nextdoor announced a 25% reduction in its full-time staff (approximately 200 employees) as part of a broader cost-cutting initiative aimed at reducing annual personnel expenses by up to $60 million, with CEO Sarah Friar expecting these measures to help the company achieve break-even on quarterly free cash flow by the end of 2025. Nextdoor also announced that CFO Mike Doyle is resigning from his position, with Matt Anderson, the Head of Finance and Strategy, taking over as CFO on November 7th. Overall, it was a weaker quarter, highlighting several challenges to the business. Following the results, Evercore downgraded the stock's rating from Outperform (Buy) to In Line (Neutral).
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nextdoor? Access our full analysis report here, it's free.
What is the market telling us:
Nextdoor's shares are somewhat volatile and over the last year have had 31 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 8.9% on the news that the company reported first-quarter results that exceeded analysts' revenue estimates. Weekly Active Users and adjusted EBITDA also beat. In addition, revenue guidance for the next quarter came in above Consensus, and adjusted EBITDA was inline. While absolute revenue growth levels are somewhat muted, these results were strong overall.
Nextdoor is down 24.9% since the beginning of the year, and at $1.55 per share it is trading 53.7% below its 52-week high of $3.35 from June 2023. Investors who bought $1,000 worth of Nextdoor's shares at the IPO in March 2021 would now be looking at an investment worth $155.50.
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