Pinterest slides as smaller players battle for share of ad market

By Samrhitha A

(Reuters) -Pinterest dropped over 10% on Friday after its first-quarter revenue forecast came in a touch below investor expectations, in a sign that smaller social media platforms could be losing the battle to bigger players for ad dollars.

The image sharing platform's numbers come on the heels of strong advertising sales from Meta and Alphabet's Google, which have a greater ability to seize on the ad bounceback and the willingness of companies to spend more.

"When advertisers are thinking hard about where to put their money, they're looking to make the biggest bang for their buck and at the moment that's with huge players like Meta and Alphabet which does leave smaller players like Snap and Pinterest fighting over what's left," said Danni Hewson, head of financial analysis at AJ Bell.

Revenues of other ad-reliant companies like Snap , New York Times and Fox were also hit during the October-to-December quarter, owing to a slowdown in advertising sales.

Pinterest was on track to lose roughly $3 billion of its market value on Friday, based on its share price of $36.49. The stock is set for its sharpest one-day percentage decline since April 28, 2023, if losses sustain through the session.

The company that has seen growing popularity with Gen Z, which is more than 40% of its user base, said it saw strong advertising spend from China and retailers, that was partially offset by weakness from the food and beverage category.

Revenue of $981.3 million in the holiday quarter and first-quarter revenue forecast in the range of $690 million to $705 million, was below estimates, per LSEG data.

"The tech giants Meta and Amazon have set a high bar when it comes to revenues. So, even though Pinterest eked out double-digit growth, the slight miss on forecast was punished," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Wall Street remained positive on the quarterly results with at least 19 analysts raising their price targets on the Pinterest stock, boosting the median to $43.15.

Pinterest trades at 29.15 times its 12-month forward earnings estimates, versus social media rival Snap's 53.02 and Meta's 23.06.

(Reporting by Samrhitha Arunasalam in Bengaluru; Additional reporting by Medha Singh; Editing by Shailesh Kuber)