On Wednesday, Citi updated its financial outlook for Nextdoor Holdings Inc. (NYSE:KIND), increasing the stock's price target to $2.25 from the previous $2.15. The firm retained a Neutral rating on the shares. This adjustment follows Nextdoor's release of fourth-quarter 2023 results and first-quarter 2024 guidance that surpassed expectations.
Nextdoor's weekly active users (WAUs) reached 41.8 million, marking a 5% year-over-year increase and a 3% rise from the previous quarter. This figure was approximately 6% higher than Citi's projections. The company's revenue for the quarter stood at $56 million, a 5% year-over-year growth, and about 9% above expectations. Furthermore, Nextdoor reported an EBITDA loss of $14.0 million, which translates to a 25.1% margin, outperforming the consensus estimate of a $20.4 million loss.
Citi noted positive engagement trends for Nextdoor, with Session Depth growth accelerating to 36% year-over-year as the number of verified neighbors climbed to 88 million from 85 million in the third quarter. This improvement is partly attributed to the company's artificial intelligence and machine learning initiatives. Additionally, Nextdoor's Ads Manager, which recently went live, contributed to the company's self-serve ads generating 40% of total revenue in the fourth quarter.
Despite the favorable results in the fourth quarter of 2023, Citi maintains its Neutral/High Risk rating on Nextdoor shares. The firm acknowledges the encouraging performance but seeks further evidence of sustained engagement and revenue growth. Citi's stance comes as Nextdoor anticipates the return of co-founder Nirav Tolia as CEO in the second quarter of 2024.
InvestingPro Insights
Nextdoor Holdings Inc. (NYSE:KIND) has recently been under the spotlight following its fourth-quarter performance and the anticipated return of co-founder Nirav Tolia as CEO. InvestingPro data and tips provide additional insights into the company's financial health and stock performance.
InvestingPro data highlights a market capitalization of $785.66 million, indicating the company's size and presence in the market. Despite an impressive gross profit margin of 81.05% for the last twelve months as of Q3 2023, Nextdoor has reported a negative revenue growth of -1.28% during the same period. This suggests that while the company is effective at controlling costs relative to revenue, it is facing challenges in increasing its top-line sales.
InvestingPro Tips for Nextdoor reveal a mixed picture. On the positive side, the company holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, indicating a strong liquidity position. However, three analysts have revised their earnings downwards for the upcoming period, and the stock's Relative Strength Index (RSI) suggests it is in overbought territory, which could signal a potential pullback in the stock price.
Investors should note the significant return over the last week, with a 20.0% price total return, and a strong return over the last month at 32.47%. These recent surges in stock price may be reflective of the market's response to Nextdoor's fourth-quarter results and forward guidance.
While analysts do not anticipate the company will be profitable this year, the recent price target increase by Citi suggests a cautious optimism that may align with Nextdoor's strategic initiatives and leadership changes.
For those considering an investment in Nextdoor, the InvestingPro platform offers a wealth of additional insights. Currently, there are 10 more InvestingPro Tips available that could help investors make a more informed decision. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/KIND.
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