Why Pinterest (PINS) Shares Are Getting Obliterated Today
What Happened:
Shares of social commerce platform Pinterest (NYSE: PINS) fell 21.9% in the morning session after the company reported fourth-quarter results with revenue missing analysts' expectations, though EPS beat. Revenue guidance for the next quarter also fell below expectations.
Bernstein's analyst Mark Shmulik highlighted the market's concerns after the results, "Coming out of this earnings season, it's fair to ask whether the smaller platforms (SNAP, PINS) are structurally disadvantaged and sub-scale in what increasingly looks like a winner-take-most digital ad landscape." This refers to the competition from bigger players such as Alphabet and Meta.
On the other hand, Pinterest added new users this quarter and beat expectations for MAUs (monthly active users). Overall, the results were weak, given the underwhelming guidance and considering the strong results delivered by Meta earlier in the season, which raised the bar for digital ad stocks.
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What is the market telling us:
Pinterest's shares are quite volatile and over the last year have had 9 moves greater than 5%. But moves this big are very rare even for Pinterest and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 10 months ago, when the stock dropped 12.8% on the news that the company reported first-quarter revenue that narrowly beat analysts' forecasts, and earnings per share (EPS) also exceeded expectations. However, Domestic MAUs slightly missed expectations and growth was tepid. Pinterest expects that Q2 revenue will grow roughly in-line with what they saw in Q4 2022 and Q1 2023, which translates to 4-5% y/y growth. This missed expectations of roughly 6% y/y growth in Q2 2023 revenue. In addition, Pinterest expects Q2 non-GAAP operating expenses to grow low teens on a percentage basis quarter-over-quarter. This implies an operating profit guidance miss vs. expectations, which is another major negative.
Pinterest is up 1% since the beginning of the year, but at $36.64 per share it is still trading 10.8% below its 52-week high of $41.05 from February 2024. Investors who bought $1,000 worth of Pinterest's shares at the IPO in April 2019 would now be looking at an investment worth $1,500.
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