Pinterest stock soars after activist investor Elliott takes majority stake

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

Video Transcript

JULIE HYMAN: And then there is the second top trending ticker, which you alluded to, that's Pinterest. The company reporting after the close, yesterday. And you can see here, the company's earnings actually missed estimates. But really that's being overshadowed by the news that activist investor, Elliott Management, confirmed it was the company's largest investor.

During the investor call, the new CEO, Bill Ready, said Elliott was, quote, "Very collaborative and engaged in talks with Pinterest." Although, we don't know exactly what that's going to entail. And Elliott, in its turn, was also very complimentary of Ready, saying that he was the right CEO, the right leader for the company at this time. And of course, he just recently took over the reins from co-founder Ben Silbermann.

I thought it was interesting here what Ready said on the call with analysts. "I do not subscribe to a growth at all costs mentality." That is what Wall Street wants to hear right now, just-- not just from Pinterest, but like from everybody, right? So he really is singing their tune.

BRIAN SOZZI: You took my quote. That's what I was gonna--

JULIE HYMAN: Sorry.

BRIAN SOZZI: --mention.

JULIE HYMAN: Sorry.

BRIAN SOZZI: I highlighted-- they have it bold--

JULIE HYMAN: I saw you smirk and I was wondering.

BRIAN SOZZI: --on my page here. Come on. No, but no, I'll continue on that quote, because Julie, that is the quote of this entire earnings call for a company I-- and I would say we-- have been very critical of the past two years, and rightfully so. The users have slowed. And they did slow in this most recent quarter, global monthly active users down 5%.

But here you had Ready give a very, very good first earnings call. Really came across as someone who probably put forth a good plan to the board to even get this job. And then secondarily, signal to the Street that next year is going to be potentially a major pullback in expenses.

He came back and said, margins are going to accelerate pretty aggressively next year, just by pulling back on expenses. So the market likes to hear that. But you take that, you take what the Elliott statement, and you think there might be a floor in the stock now.

There's just too many positive things here in the short term to suggest the stock might go down over the next few months. You have Ready's commentary, you had a love fest here with Elliott, those are all good things.

BRAD SMITH: Yeah, and it's moving through what it had to tell investors yesterday about some of their own guidance ranges for third quarter growth, mid-single digits is what the company had to say. But analysts, they were expecting more closer to, I believe, 13% or 12.7% to be exact.

And so with that in mind, it comes down to that average revenue per user that they're continuing to see on the platform. And even if we were to see a tie up as we've been talking about over these past couple of weeks here, what type of growth would that actually facilitate for Pinterest, whether that just be on the number of transactions that can take place on the platform or they monetize the ability of the existing number of consumers or customers, people who are willing to purchase based on something that they've been pintrested in or inspired by on the platform.

BRIAN SOZZI: And to that end, Bill has a lot of work to do. And just like we did with Dara here, while we're putting some praise here on Pinterest, he has some serious work to do. And Elliott, based on people I've talked with, had a lot of contentions with the searching function on Pinterest. It doesn't work that great.

So I just tried it out again this morning. I typed in golf clubs. I get taken to a place on the site that doesn't show any of the new golf clubs. I want to buy golf clubs. Why can't Pinterest just have these things surface in my feed so I could buy golf clubs? They get a take of that. But I think that's what Bill is going to try to create.

BRAD SMITH: Yeah, well, I can help you out with the golf clubs.

BRIAN SOZZI: Well, just don't go on Pinterest because you won't find any.

BRAD SMITH: Yeah, exactly. I mean, it's always been-- the search functionality that has been one of the biggest user pain points. Because even if you are searching or looking to get inspired, you don't want to have to go through a black hole of the different DIY garden and outdoor tips or the different recipes that you're looking for a good quiche.

At the end of the day, you want to just be able to type something in, have the ease of that search-- similar to what TikTok, similar to what Instagram, similar to what Google even has been able to move forward with. And Pinterest has been lagging in that category for so long. You wonder if it turns off some of the even long-time users of the platform and if they decide to step away over an extended period of time.

And especially with this shift that we're seeing, right? In the type of consumer that every social media platform is trying to go after. They're looking for the younger demographic. If Pinterest misses out on that demographic that's spending more of their screen time on TikTok or spending more of their screen time even on Instagram, perhaps, because they're not getting inspired by what they're seeing on Pinterest, then that is also an issue that they're gonna have--

BRIAN SOZZI: You're a quiche guy?

BRAD SMITH: I am a quiche guy.

BRIAN SOZZI: It's good to know your colleagues. I'm just curious.

BRAD SMITH: Yeah.

JULIE HYMAN: I'm a quiche guy.

BRIAN SOZZI: You're a quiche guy?

JULIE HYMAN: Sure.

BRIAN SOZZI: OK, cool.

BRAD SMITH: Quiche is great.