Despite an impressive Q4 2024 performance report that included top and bottom-line beats, NerdWallet (NRDS) has experienced a nearly 20% one-day drop in share price as market participants honed in on the projected ongoing decline in monthly users.
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A Troubling Trend
NerdWallet, an online provider of personal finance advice and financial products, reportedly exceeded fourth-quarter expectations by growing its revenue 37% year-over-year, reaching $184 million and achieving $17 million in non-GAAP operating income. The firm credits its overall success partly to the robust demand in its Insurance sector, which witnessed an 800% year-over-year surge, and to a 5% increase in its banking products.
However, due to rising 10-year rates, NerdWallet faced consumer and SMB lending challenges. Although the company expanded its mortgage business by 4%, the almost 80 basis rise in 30-year mortgage rates has moderated its growth expectations for this sector. The personal loans division saw a 51% decrease year-over-year as efforts were redirected toward Insurance. Yet, early indications suggest a return to growth in Q1 of 2025 in response to shifting resources to meet increasing demand.
The company reported a 20% drop in Monthly Unique Users (MUUs) in Q4 and anticipates continued challenges in organic traffic growth toward non-monetizing pages, though the firm expects stabilization and a return to growth by early 2026.
NerdWallet has announced it is shifting away from focusing on the number of relationships rather than their quality, as shown by its decision to move away from its Monthly Unique User (MUU) disclosure. The company believes converting even a small percentage of existing mortgage traffic into brokering relations is more valuable than triple education-oriented mortgage traffic.
Analysts Remain Bullish, But Questions Linger
Analysts following the company have mostly remained bullish on the stock. Yet, KeyBanc’s five-star analyst Justin Petterson lowered the price target on NerdWallet’s shares to $18 (from $20) while keeping an Overweight rating, noting the company outperformed expected revenue growth for Q4 and expects growth tailwinds to continue into Q1 2025. However, a softer margin outlook and diminishing traffic growth invite questions about potentially shifting unit economics.
It is a trend investors will want to monitor moving forward.
