Pinterest stock down on Q4 earnings miss as ad spending slows

Yahoo Finance Live anchors discuss fourth-quarter earnings for Pinterest.

Video Transcript

[AUDIO LOGO]

- All right, let's get into the second thing that you need to know this morning. Pinterest, the social media company posted its fourth quarter earnings, missing analyst expectations and providing cautious commentary on guidance for the March quarter, saying that it expects sales to increase in the low single digits from a year ago.

We've been tracking this one, this morning ticker symbol PINS for everybody tracking it on the "Yahoo Finance" platform. And one of the things that I saw from the earnings call, particularly that I highlighted within my own notes, some of the CPG advertisers, consumer packaged goods advertisers, they faced headwinds from the macroeconomic environment, the company noting, and saying that was one of those headwinds that the strength that they had seen in other parts of the business was offset by.

And so, continue to keep a close eye on that going forward from here. But really, seeing some success within this, what they're calling this mobile deep linking format here, MDL, on some of their shopping ads. So that's something that we can expect to hear more from about the company.

- And the market was initially focused on that advertising weakness, which showed up in-- it looks like has continued according to the Pinterest team into the current quarter, just in terms of weakness. But pre-market, we're now seeing a pretty large reversal in Pinterest shares. It was down, I think, about 6% to 7% last night.

Now almost up. And why is it up? For the first time, you're getting a sense that they're cutting big time back in expenses. There has been two rounds of layoffs at this company, and they are now teasing, really, double digit drops in operating expenses and potential real margin improvement this year, despite weakness in sales.

That is a big shift in tone by Pinterest, in large part it comes after a new board member joined the company in Elliott after they faced activist pressure. You have that, a new stock buyback, and the sales outlook challenging, but maybe you're starting to get a turn. I do think the Street wants to start liking this stock. They just need the sales to start to turn.

- This raises an important question, not just about Pinterest, but about so many companies we've talked about this earnings season. At what point is cost-cutting going to be enough if the sales are not picking back up, right? And this is true, obviously not just for Pinterest, but for every big tech company we've heard about this earnings season that's cutting, cutting, cutting, cutting. How long can that last you, not just with your earnings, but in the eyes of investors before that growth has to reaccelerate? How much time have you bought yourself, right? And I think that's a big question.

With regard to Pinterest specifically, I saw a lot of analyst commentary around how Pinterest is sort of a second tier social media platform, if you will. And so, when it comes to the ad spending that's out there, if I'm an advertiser I'm going to choose Facebook first, right? I'm going to choose maybe some of-- a YouTube verse, whatever it is, and then the ad dollars are going to flow down to Pinterest. So in this environment where advertisers are being more choosy, Pinterest is maybe a little bit more on the back foot compared with some of the larger players.

- It also becomes a question for the consumer that Pinterest is continuing to tout themselves as attracting Gen Z. We heard them come up multiple times on the call, but when is the spending power and the disposable income of Gen Z going to be enough to buoy Pinterest more so than the spending habits that they may see from some of the other millennials, if you will, that have come in to some of the peak earnings years, and then even on the baby boomers that may be just looking for a good DIY project as well on the weekends, as we all. Let's be real.

But at the end of the day, for the number of times that they touted Gen Z and the customer lifetime value that could bring, I think investors here need to evaluate what that timeline to actually cashing in or monetizing fully on that disposable income of Gen Z may look like, and what are some of the other competitors in this landscape that could do shoppable within social extremely well, and that's broader market share discussion too.

- Yeah. We'll just add too, Julie, there is a sense that this company may be gaining a lot of business at Twitter loss because of the negativity on that platform, and I think Pinterest is going to drop in a few weeks some own data, just further I think fleshing this out which should be very interesting, in addition to a greater push into social commerce. But I'm going to put all this stuff to Pinterest CEO, Bill Ready. Still the new CEO over Pinterest. I'll be talking to him at 4:00 PM Eastern time. You do not want to miss that chat. Very much looking forward to catching up with Bill.