Nextdoor Holdings, Inc. (KIND - Get Rating) in San Francisco serves as a community network in the United States and overseas, connecting neighbors, businesses, and public services. It enables small- and medium-sized enterprises, large brands, government organizations, and NGOs to obtain information, provide and receive assistance, and develop relationships.

The stock is down 71.9% in price over the past year and 64.4% year-to-date to close yesterday’s trading session at $2.81. In addition, it is currently trading below its 52-week high of $18.59, which it hit on Nov. 08, 2021.

Though KIND’s recent partnership with Microsoft Corp. (MSFT) to show hyperlocal, neighbor-generated content directly into Microsoft properties such as MSN and Microsoft Bing may help it achieve long-term growth, its widening losses may raise concerns among investors.

Here is what could shape KIND’s performance in the near term:

Poor Bottom-line Performance

KIND’s total revenue increased 48.3% year-over-year to $51 million for the first quarter, ended March 31, 2022. However, its costs and expenses increased 41.8% from the year-ago value to $84.23 million. Its operating loss rose 32.9% from the prior-year quarter to $33.24 million. The company’s net loss grew 31.1% from its year-ago value to $32.49 million. Its loss per share amounted to $0.09 over this period. In addition, its cash and cash equivalents declined 60.1% for the three months ended March 31, 2022.

Poor Profitability

KIND’s 0.39% trailing-12-months asset turnover ratio is 16.6% lower than the 0.47% industry average. Its trailing-12-months cash from operations stood at negative $48.03 million compared to the $263.72 million industry average. Also, its trailing-12-months ROA, net income margin and ROC are negative 12.5%, 49.4%, and 11.7%, respectively.

POWR Ratings Reflect Bleak Outlook

KIND has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. KIND has an F grade for Stability, which indicates the stock’s higher volatility than its peers.

Among 70 stocks in the F-rated Internet industry, KIND is ranked #61.

Beyond what I have stated above, one can view KIND ratings for Growth, Value, Quality, Momentum, and Sentiment here.

Bottom Line

While KIND reported stable top-line growth in its last reported quarter, its poor bottom-line performance and negative profit margins are concerning. Analysts expect its EPS to remain negative in the current year and next year. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $5.04 and $8.03, respectively, indicating a downtrend. So, we think the stock is best avoided now.

How Does Nextdoor Holdings Inc. (KIND) Stack Up Against its Peers?

While KIND has an overall D rating, one might want to consider its industry peers, Yelp Inc. (YELP - Get Rating), which has an overall A (Strong Buy) and Travelzoo (TZOO - Get Rating), and trivago N.V. (TRVG - Get Rating), which have an overall B (Buy) rating.

Note that TZOO and TRVG are two of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

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KIND shares rose $0.01 (+0.36%) in premarket trading Thursday. Year-to-date, KIND has declined -64.26%, versus a -18.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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