Nextdoor Holdings' (KIND) launch of its rebuilt Next platform causes "more harm than good," based on bear case assumptions, with revenue growth to fall into the low-to-mid-single digits next year and beyond, Morgan Stanley said in a Monday note.

The company intends to infuse capital in initiatives like the Next platform despite its emphasis on cost-cutting methods, the note added.

In Q1, the revenue fell 2% due to lower ad spending by certain advertisers on the platform along with macro challenges, the note said, adding that "advertisers are being more nimble and performance focused in how they plan their budgets."

"Coupled with the platform-level uncertainty, the question marks around macro and the ad spend environment are also likely to be an overhang on KIND," according to the note.

Meanwhile, the analyst said, when assuming the bull case, the launch of programmatic inventory on the platform later in the year could also potentially bring back large advertisers who pulled back spending earlier in the year.

Morgan Stanley downgraded Nextdoor to underweight from equalweight and lowered its price target to $1.10 from $2.70.

Nextdoor's stock was down 1.4% in recent Tuesday trading.

Price: 1.37, Change: -0.02, Percent Change: -1.44