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Shares of Pinterest, Inc. (NYSE: PINS ) fell this week after the image-sharing platform reported weaker-than-expected Q4 revenue and issued cautious guidance for the first quarter. After turning a profit a few years ago, the company has maintained positive earnings in almost every quarter, despite disruptions caused by the pandemic.
While the unique business model gives the company an advantage over other social media platforms, the current weakness in the advertising market puts pressure on profits. The stock made strong gains ahead of Monday’s earnings, reflecting market optimism about the company’s finances. But the short-lived momentum fizzled after the announcement and the stock has fallen about 8% since then.
Evaluation
PINS maintained an uptrend throughout the last year, despite experiencing high volatility, and entered 2013 on a high note. The question is whether it will create enough shareholder value this year. Currently, the price is low, but the decline in revenue growth and management guidance suggests that Pinterest is not immune to the headwinds the tech sector is currently facing. So, it seems that it is not the right time to buy or sell stocks. Prospective investors may consider adding it to their watchlist.
Check out this space to read management/analyst comments on monthly reports
Currently, the company’s growth strategy is focused on integrating online shopping features at all levels and increasing monetization, by increasing revenue per user. The company has expanded its user base slowly but steadily in the last quarter and ended the fiscal year with about 450 million users, which is 4% from 2021.
Finance
It is expected that ad revenue will recover in the long term as the current challenges are easy – such as the unstable macro environment and reduced ad spending due to high inflation. In the fourth quarter, adjusted earnings beat estimates for the second time in a row, although the latest number fell 41% from last year to $0.29 per share. Increased revenue in the US/Canada market more than offset the contraction in Europe, and the top line rose 4% year-on-year to $877.2 million.
Commenting on the results, Pinterest CEO Bill Ready said, “We build and deliver new ad measurement and technology solutions that deliver better results for advertisers. And we’re just getting started. I have a strong belief that we’ll continue to innovate and deliver value to our users and business partners. We’re growing our global MAU in Q4 to 450 million, up sequentially and year-over-year. Our global mobile app users, which account for more than 80% of impressions and revenue, grew 14%. And US and Canadian mobile app users grew 5%, accelerating from last quarter.
Outlook
Management now expects first-quarter revenue to grow in the low single digits, which is below consensus estimates. The weak guidance mainly reflects weakness in corporate spending, and reflects concerns raised by ad-supported social media like Meta Platforms, Inc. (NASDAQ: META) and Alphabet, Inc. (NASDAQ: GOOGL, GOOG), which reported unimpressive operating results recently.
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Pinterest also announced the departure of Todd Morgenfeld, chief financial officer and head of business operations He will step down in July this year. Earlier, the company had laid off about 150 employees as part of streamlining the business.
Pinterest shares remained in the red after a sell-off following earnings and traded lower during Wednesday’s session. However, all remained above the 52-week moving average.
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