Morgan Stanley cuts Nextdoor stock rating, price target to $1.10

On Monday, Nextdoor Holdings Inc. (NYSE:KIND) received a downgrade in stock rating from Morgan Stanley (NYSE:MS), moving from Equalweight to Underweight. The firm also revised its price target for the company’s shares, reducing it significantly to $1.10 from the previous $2.70. According to InvestingPro data, the stock has already declined over 45% in the past six months, currently trading at $1.39, near its 52-week low of $1.35.

The decision by Morgan Stanley analysts comes amid concerns regarding Nextdoor’s recent platform overhaul, named NEXT, which introduces additional uncertainty for the company. This is compounded by existing macroeconomic challenges that smaller, brand-based advertising platforms are currently facing. InvestingPro analysis shows that while the company maintains strong gross profit margins of 83% and holds more cash than debt, it remains unprofitable with a negative EBITDA of $85.27 million in the last twelve months.

In light of these factors, Morgan Stanley has adjusted its expectations for Nextdoor’s financial performance, specifically its EBITDA projection for 2026, which has been decreased by $44 million. The firm’s analysts believe that even with the anticipated growth, Nextdoor’s valuation remains high when compared to its growth prospects.

The downgrade to Underweight signals a cautious stance from Morgan Stanley, suggesting that the investment firm sees more downside than upside potential in Nextdoor’s stock at its current market price. The new price target of $1.10 reflects this revised outlook.

Nextdoor’s focus on neighborhood-based social networking has faced increased scrutiny as it attempts to scale its advertising model. The rollout of the NEXT platform is a strategic move to revamp its offerings, but it has also introduced variables that have led to a more conservative view from analysts regarding its near-term financial trajectory.

In other recent news, Nextdoor Holdings Inc reported its Q1 2025 earnings, revealing a revenue of $54 million, which fell short of the anticipated $59.65 million. The company also reported a net loss of $22 million for the quarter. Despite these financial challenges, Nextdoor maintains a strong cash position with $418 million in cash, cash equivalents, and marketable securities. Looking ahead, the company projects Q2 2025 revenue of approximately $60 million and an adjusted EBITDA loss of around $10 million. Nextdoor is preparing to launch its " Next (LON:NXT)" platform by late July 2025, which aims to enhance user engagement and monetization. The company is also transitioning to programmatic ad buying, a move that is expected to unlock new demand. Analysts from firms like Goldman Sachs and Craig Hallum have shown interest in how these initiatives will impact user growth and monetization over the coming months.

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