Hyperlocal social networking service Nextdoor (NYSE:KIND) saw its market value climb following a leadership change announcement. Struggling since its public market debut, KIND stock likely popped on the potential for positive momentum amid burgeoning sentiment for the local advertising market.
According to the company’s press release, Nirav Tolia will be appointed as CEO, president and chairperson. Stepping down in these roles is Sarah Friar, who is leaving the firm on a relative high. During the leadership change announcement, Nextdoor also provided preliminary unaudited results for the fourth quarter. Key highlights include:
- Weekly active users (WAU) of 41.8 million, an increase of 5% year-over-year and 3% quarter-over-quarter.
- Revenue of $56 million, exceeding management’s guidance of a range between $50 million to $52 million.
- Cash and cash equivalents and marketable securities of $531 million as of Dec. 31, 2023.
Also, Nextdoor’s board authorized a $150 million increase to the company’s existing share repurchase authorization. Further, this program will extend until March 31, 2026, thereby boosting KIND stock via implied supply constraint.
Friar expressed that the current juncture is an ideal one to “put the company back in Nirav’s hands.” Nirav is the co-founder of Nextdoor and previously served as CEO and president until Friar took the helm in 2018.
KIND Stock May Enjoy Sector Tailwinds
As Friar stated, since joining in 2018, Nextdoor nearly tripled to more than 88 million “Verified Neighbors,” essentially the company’s active users. In addition, the Nextdoor network is now reaching over 330,000 neighborhoods around the world. Further, the succeeding CEO remarked that during Friar’s tenure, the company built a strong balance sheet.
It was also during Friar’s time at the top when KIND stock entered the public market. In 2021, Nextdoor merged with a special purpose acquisition company or SPAC. Unfortunately, after seeing an initial spike upward, shares quickly began tumbling. Outside circumstances — particularly soaring inflation and the subsequent spike in interest rates — contributed to the pressure.
Fundamentally, a vexing matter impacting KIND stock is an apparent lack of a pathway to profitability. On the top line, Nextdoor continues to expand. With the latest preliminary sales results, the company should see sales of $218.8 million in 2023, up from $212.8 million in the prior year. However, net losses have consistently expanded since 2019, according to data from Gurufocus.
Nevertheless, stakeholders of KIND stock will be looking to a potentially rising market for local advertising. Per Statista, analysts project that local advertising revenue in the U.S. will hit $175.6 billion this year, up from $161.7 billion in 2023.
Why It Matters
Companies that have entered the public domain via reverse mergers with blank-check firms have generally not performed well. KIND stock is no exception. However, analysts historically have been neither warm nor cold about its prospects with a hold consensus view. The average price target stands at $2.83, implying almost 42% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
