While it lives in the large shadow of Facebook parent Meta Platforms, Pinterest stock became a popular Wall Street pick last year and racked up a more than 50% gain in 2023. This year has been a different story for the social media stock.
Pinterest stock lost 14% to close at 29.18 on the stock market today, pushing shares to a more than 21% year-to-date loss.
The San Francisco-based company late Thursday posted a better-than-expected 43% increase in third quarter earnings, to 40 cents per share, and sales increase of 18% to $898 million. The problem for some investors is that revenue growth for Q3 barely squeaked by estimates. And guidance for the fourth quarter sales growth of 15% to 17% underwhelmed.
"Worryingly for investors, the implied guidance would mark the third quarter in a row of decelerating revenue growth and already puts Pinterest at the lower end of their mid-to-high teens 3-5 year revenue growth guidance shared at their Investor Day 14 months ago," Bernstein analyst Mark Shmulik wrote Friday. He rates Pinterest stock at market perform.
Pinterest Stock: Partnering Up With Amazon, Google
The post-earnings sell-off continues a rocky year for Pinterest stock.
Shares kicked off the year with a 21% rally through late June. Shares tumbled on a Q2 results disappointed in July and had yet to recover above Pinterest's 200-day moving average before this latest sell-off buried the stock further. Overall, Pinterest is nearly 40% off the highs from late June.
That's a big different from the 2023 rally, during which Pinterest picked up more than a dozen buy calls from Wall Street analysts, according to FactSet tracking. The bull case for Pinterest bet the company's new leadership can draw on users looking for fashion tips and home-design inspiration to sell more e-commerce ads. Chief Executive Bill Ready has focused on making Pinterest more "shoppable" over his two years leading the company.
Central to that effort is a partnership it formed last year with Amazon to display ads from e-commerce behemoth on Pinterest's platform. Earlier this year, Pinterest reached a similar deal with Alphabet for Google ads, focused on international markets.
Analysts are bullish on both those partnerships. But progress so far may be letting some investors down. BofA Securities analyst Justin Post wrote Friday that Pinterest stock's slide can likely be attributed to a "1% 3Q revenue and 4Q guide miss vs expectations, lingering disappointment on Amazon/Google third-party deal contribution, and ramping headcount investment."
Pinterest-Amazon Deal Expands
Ready offered several positive on a call with analysts Thursday. Sales growth has accelerated significantly from the 4% rate in Q4 2022. Lower-funnel advertising – ads targeting shoppers nearer to an actual purchase decision — is the fastest growing part of the business.
"Advertisers are increasingly seeing Pinterest as a great place to connect with customers demonstrating high commercial intent," Ready said.
Pinterest's global monthly active users grew a better-than-expected 11% to 537 million. Average revenue per user grew 5% to $1.70.
Ready also said the company's partnership with Amazon is expanding beyond the U.S. to Mexico and Canada. Google, meanwhile, is helping Pinterest monetize other international markets, where its revenue per user is significantly lower.
"Both of these partnerships have continued to build sequentially throughout the year and we expect that trajectory to persist into Q4," Ready said.
Analysts with buy calls on Pinterest are willing to be patient. That includes BofA's Post, who reiterated a buy call and said he expects "healthy growth vs industry" for 2025.
CFRA analyst Angelo Zino upped his view on Pinterest to a "strong buy" rather than buy following the report.
"We see greater focus on shoppable content, efforts to make the platform more actionable, and international expansion as growth drivers," Zino wrote to clients. "We see the pullback as an enhanced buying opportunity given enticing valuation (less than 14x our '26 view), healthy financials (net cash of $2.4 billion), and view for mid-teens growth/margin expansion ahead."
Pinterest Stock Falls Below Moving Averages
The technical ratings on Pinterest paint a bleaker view, however. Shares have now sank below Pinterest 21-day and 50-day moving averages and fell further off the 200-day long-term support level.
Further, Pinterest's IBD Relative Strength Rating was a meager 32 out of 99. The RS Rating means that Pinterest has outperformed less than a third of all stocks in IBD's database over the past year.
On the positive side, Pinterest has a strong EPS Rating of 97 out a best-possible 99, pointing to strong earnings growth for recent quarters.
That score helps Pinterest stock hold an IBD Composite Rating of 80 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
