Pinterest shares drop as company misses on user growth … again

Pinterest’s shares had popped last week when Snap posted its best quarter in four years, as investors were betting Pinterest’s image-based social app would also see a return in advertiser spending. Those expectations now appear to be correct, as Pinterest beat on earnings with second-quarter revenue of $613.2 million and earnings per share of 25 cents, above analysts’ estimates. However, Pinterest’s stock still tanked as the company reported monthly active user growth of just 9% to reach 454 million, when analysts were expecting 482 million.

Ahead of Pinterest’s announcement, Wall St. had forecast revenue of $562.3 million and earnings of $0.133 per share, up from a loss of $0.70 per share from the same quarter last year.

But while Pinterest delivered on financials, the company’s struggles with user growth sent the stock tumbling.

The image pinboard and shopping inspiration site had initially benefitted from increased engagement and user growth during the early days of the pandemic, but both slowed in the first quarter of 2021 due the easing of COVID-19 restrictions, which had then sent the stock down by more than 10% after its first quarter earnings were posted.

Today, the stock was down more than 12% in after-hours trading, shortly after earnings were announced.

Pinterest addressed the issues around user growth upfront on the earnings call, again blaming the COVID pandemic for declines in usage.

“The pandemic was an unprecedented and unique global event,” explained Pinterest CEO Ben Silbermann. “In past earnings calls, we talked about how stay-at-home orders significantly increased usage of Pinterest. And for the past year, we’ve highlighted how people came to Pinterest for inspiration to reinvent their lives during such a difficult time,” he continued. “Now, as the world opens up, we’re seeing the similar effect in the opposite direction that impacted our growth — particularly because some of the core use cases we see on our platform are less common in 2021 than they were a year ago. That shifting behavior in Q2 impacts engagement,” Silbermann said.

The company also noted that, as of July 27, 2021, its monthly active users in the U.S. had declined by approximately 7%, while global monthly active users gained approximately 5% year over year.

Pinterest said its web users tend to be less engaged and generate less revenue than those who come from mobile apps. In the second quarter, its monthly active users on mobile apps grew in U.S. and internationally, year over year, by more than 20%.

The company’s issues with user growth and engagement indicate just how critical Pinterest’s plan to cater to the creator industry is the company’s future. Recently, the company launched video-first Idea pins that allow creators to showcase their crafts, recipes, fashion, beauty tutorials, projects or anything else. This week, Pinterest introduced new features that will now allow creators to make money from those pins.

Despite user growth issues, the return of ad spending led to year-over-year revenue growth of 78% in the first quarter, and the company predicted it would see even higher 105% year-over-year revenue growth in Q2. Today, it reported 125% revenue growth — above with the 116% Snap reported in its record second quarter — a figure Pinterest attributed to advertisers’ return.

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