Pinterest Stock Drops As Covid-19 Takes A Toll On Earnings

Pinterest stock plunged Wednesday on the heels of first-quarter results that revealed a slowdown in user growth connected to the Covid-19 recovery, with more people going outside than staying at home.


After the market close Tuesday, Pinterest (PINS) presented its quarterly report that topped estimates, as revenue surged to its best growth in three years.

The bigger surprise was monthly active users. They grew 30% from the year-ago period to 478 million, but below estimates of 479.4 million. Pinterest said it expects “flat” user growth in the U.S. market in the second quarter.

“As pandemic lockdowns were eased in some parts of the world during mid-March, we began to see signs of less engagement and user growth on Pinterest, and we assume this means people are spending more time offline,” Pinterest Chief Executive Ben Silbermann said during the conference call with analysts. “While it’s impossible to say how people act as we enter the summer months, we anticipate this trend will continue.”

Pinterest stock dropped 14.5%, closing at 66.33 on the stock market today.

Pinterest reported adjusted earnings of 10 cents a share on revenue of $485 million. Analysts expected Pinterest to report earnings of 6 cents on revenue of $471.7 million, according to FactSet. Revenue jumped 78% from the year-ago period, driven by more small- to midsize advertisers and further international expansion.

For its second quarter, Pinterest expects revenue to jump 105%, which is about $558 million. That compares with estimates of $530.4 million, or 95% growth.

Pinterest Stock And Covid Lockdowns

“During the Covid-19 crisis, Pinterest’s platform dovetailed well with the interests of users in lockdown mode, serving as a helpful discovery tool for consumers trying to make the best of life at home,” Monness Crespi Hardt analyst Brian White said in a report to clients. “This environment drove a strong uptick in engagement on Pinterest and attracted new users to the platform; however, these forces are now fading.”

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KeyBanc Capital Markets analyst Justin Patterson lowered his price target on Pinterest stock to 89, from 92. But he maintained a rating of overweight.

“We view monthly active user guidance, which Pinterest historically does not provide, as appropriately conservative, and believe several use cases (e.g. travel, wedding) and marketing initiatives could help drive upside,” Patterson wrote in a note to clients. “We recommend buying PINS on weakness.”

Pinterest is a mobile app where users can browse millions of images and videos posted by its own users. Moreover, the company has developed methods for image searches that leverage machine learning and computer vision. Also, it has a recommendation engine to help users search, browse and organize images and videos.

According to the IBD Stock Checkup tool, Pinterest stock currently has an IBD Composite Rating of 97 out of a best-possible 99.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.


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