The Red Flags Flying Over Nextdoor: Why Institutions Are Bailing and What It Means for Investors

The stock market is a battleground of emotions, and right now, Nextdoor Holdings (NYSE: KIND) is feeling the heat of institutional investors fleeing the scene. Let me break down why this matters, what it says about the company's future, and whether you should jump in—or run for cover.

The Sell-Off Heard Around Wall Street

Institutional investors don't just sell 60% or 90% of their stakes on a whim. The numbers are screaming caution:
- Cubist Systematic Strategies LLC slashed its position by 90.7% in May 2025, unloading shares valued at $82,000.
- California State Teachers' Retirement System, a major public fund, cut its stake by 61.4% in March .
- Goldman Sachs, no stranger to high-stakes moves, reduced its holdings by 13.9%, offloading over $2.1 million in shares.

This isn't a blip. These are strategic exits by players who've likely done their homework. The question is: What are they seeing that retail investors might not?

The Financials: A Mixed Bag of Mediocrity

Nextdoor's Q1 2024 results showed a slight beat on EPS (-$0.06 vs. estimates), but revenue of $54.18 million still left a sour taste. Analysts are projecting an annual EPS of -0.22 for 2025—meaning the company is still losing money.

Here's the rub: Sustained losses in a competitive tech landscape are a red flag. While Nextdoor's niche in neighborhood networks has value, the market isn't rewarding it yet.

Analysts Are Getting Cold Feet

The Street isn't just lukewarm—it's icy. Goldman Sachs slashed its price target to $1.75, Morgan Stanley downgraded it to “underweight,” and B. Riley's “hold” at $2.00 feels more like a plea for stability than optimism.

When even the “hold” recommendations are this low, it's clear: The bulls are gone.

Legal Headwinds: The Elephant in the Room

Let's not forget the class-action lawsuit filed in December 2024. While no details are provided, lawsuits in the tech space often stem from regulatory missteps or shareholder grievances. For a company already struggling to turn a profit, legal costs could be the straw that breaks the camel's back.

What This Means for Investors

This isn't just about institutional selling—it's about loss of confidence. Here's the play:
1. Avoid the Trap: Institutions are rarely wrong in the long run. Their exits suggest Nextdoor's valuation is overblown.
2. Wait for a Bottom: If you're a contrarian, look for a sustainable bounce—not just a dead-cat bounce.
3. Focus on Fundamentals: Until Nextdoor proves it can grow revenue meaningfully and cut losses, this is a “watch from the sidelines” story.

Final Take: Proceed with Extreme Caution

Jim Cramer's mantra? “You can't go broke taking profits.” Here, the opposite is true: You can go broke ignoring institutional red flags.

Nextdoor's stock is a cautionary tale of a company stuck in neutral. Unless there's a game-changing pivot or a sudden surge in profitability, this one's better left on the “avoid” list.

Stay vigilant, stay informed—and never underestimate the herd.

Investment advice: This is not financial advice. Consult a professional before making investment decisions.