Pinterest stock slumped below its 50-day line early Friday after the social media site reported light fourth-quarter sales despite rampant expansion to Gen Z users.
Though sales grew 12% year over year to $981.3 million, they still lagged Wall Street's expectations for $991 million. Sales also underperformed Google owner Alphabet's "disappointing" 13% sales growth, Bernstein analyst Mark Shmulik said in a report.
"Coming out of this earnings season, it's fair to ask whether the smaller platforms (Snap, Pinterest) are structurally disadvantaged (to) subscale in what increasingly looks like a winner-take-most digital ad landscape," he said in a report.
On today's stock market, Pinterest stock skidded 9.5% to 36.87. That put Pinterest shares below their 50-day moving average, according to MarketSmith.com.
Guidance Rocks Pinterest Stock
"There was nothing actually wrong with Pinterest's print," Bernstein's Shmulik said.
Revenue and guidance for 15% to 17% sales growth in the first quarter were below forecasts. But Pinterest now has partnerships with Amazon and Google, and is seeing improvements in ad products, flood of inventory and more intentional user behavior.
"There's a hope these efforts will show up in a visible acceleration that's just out of reach," he said.
Further, the company's earnings nearly doubled year over year and came in a penny above Wall Street's forecast at 53 cents a share.
And Pinterest reported a higher-than-expected number of global monthly users at 498 million, up 11% vs. the same three months in 2022. That's the fastest growth in monthly users since the first quarter of 2021, Shmulik said. Notably, Gen Z now accounts for 40% of active users.
But Shmulik kept his market perform rating on Pinterest stock and cut his price target by 1 to 38.
"While management remains steadfast in their conviction that there's more commercial intent on the platform, we're not yet convinced the ceiling is as high as promised," he said. "We're hopeful that partnerships with Amazon and now Google could be the wild card to break through."
Pinterest stock has a strong IBD Relative Strength Rating of 95. This puts Pinterest's 12-month stock performance in the top 5% of all stocks, regardless of industry group. Shares also have a nearly perfect Composite Rating of 98, a measure of fundamental and technical strength.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
