Pinterest stock sank Wednesday, despite the social media company reporting second quarter earnings and sales that edged past expectations. Sales guidance from Pinterest for the current quarter came in below expectations.
Pinterest said Tuesday it earned an adjusted 29 cents per share on sales of $854 million for the June-ending quarter. On average, analysts polled by FactSet expected the San Francisco-based company to post adjusted earnings of 28 cents per share on sales of $849 million. Sales advanced 21% year-over-year while adjusted earnings grew 38%.
Despite the sales and earnings beat, Pinterest stock fell sharply late Tuesday. The shares shed more than 8% to 34.08 in premarket trades Wednesday morning.
Lower-than-expected Q3 guidance may be to blame. For the current quarter, Pinterest guided for sales of $892.5 million at the midpoint of its range. Prior to company posting its results, analysts were projecting Pinterest would tally $909 million in sales for the September-ending quarter, according to FactSet.
Pinterest User Growth
Meanwhile, monthly active users for Pinterest grew 12% year-over-year to 522 million. Pinterest had average revenue per user of $1.64 for the quarter, up 8% from last year.
Bill Ready, who took over as Pinterest chief executive two years ago, said the company's efforts to better monetize the Pinterest website and app are paying off.
"Advertisers are seeing improved performance across key objectives on Pinterest – from brand awareness to conversion – as we continue to roll out AI-powered products and experiences," Ready said in a news release. "As a result, we're gaining share of advertising budgets with some of the world's largest brands."
Pinterest's revenue is still heavily dependent on its North American operations. The company had an average revenue of $6.85 per U.S. and Canadian user, compared to $1.03 per user in Europe and 13 cents per user in the rest of the world.
Meanwhile, the rest-of-world user base represents Pinterest's largest and fastest-growing market. Total monthly users for rest-of-world grew by 17% year-over-year in the second quarter to 288 million. In the U.S. and Canada, total monthly active users grew 3% year-over-year to reach 98 million.
Earlier this year, Pinterest announced a partnership with Google-parent Alphabet that will have Google's Ad Manager serve ads to Pinterest users in international markets. The company has a similar deal with Amazon focused on the U.S. market.
Pinterest Stock Analyst Response
Following the report, Wedbush analyst Scott Devitt reiterated a neutral call on Pinterest stock. He lowered his price target for Pinterest to 37 from 46.
"We think investors will continue to debate the sustainability of growth in 2H24 and in 2025 against harder (comparisons)," Devitt said in a client note Wednesday. He also expects an ongoing debate about how Pinterest's push to show more ads will affect user engagement.
Piper Sandler analyst Thomas Champion similarly lowered his price target for Pinterest stock, to 42 from 55, but maintained a positive overweight rating.
"The stock reaction seems a little extreme," Champion wrote to clients late Tuesday. "The big picture is that PINS continues to roll out new products like Performance+ (and) build adoption for Direct Links and measurement tools. Engagement appears steady and high-teens growth suggests share gains."
Pinterest Stock: Technical Ratings
Prior to its earnings report, Pinterest stock fell a fraction to close at 37.35 in Tuesday trading. Shares have gained 31% in the past 12 months but are slumping of late. Pinterest stock is down nearly 15% in July.
Coming into the report, Pinterest stock had an IBD Composite Rating of 88 out of 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.
Further, Pinterest's IBD Relative Strength Rating was 81 out of 99.
