Pinterest’s outlook for second-quarter growth was below Wall Street’s expectations.
Gabby Jones/Bloomberg
Pinterest stock shed much of its 2021 gains Wednesday after the social media firm reported first-quarter results the evening before. Though the company’s earnings and revenue figures beat expectations, Wall Street honed in on disappointing user growth.
Shares of Pinterest (ticker: PINS) were down 13% to $67.49 in mid-day trading, while the S&P 500 index was flat. The drop cut the stock’s year-to-date gains to 2.5% and one-year gains to 223%.
Citi Research analyst Jason Bazinet noted that the company’s adjusted earnings and revenues were all ahead of analysts’ consensus estimates. That said, he thinks the market cares more about user growth. And though first-quarter user growth was just a bit short of expectations, the company’s outlook for second-quarter growth in the mid-teens was below Wall Street’s expectations for about 20%. Bazinet has a Neutral rating with an $85 price target.
JPMorgan analyst Doug Anmuth maintained an Overweight rating, but lowered his price target to $95 from $102. He still thinks Pinterest can continue to optimize its ad supply, drive higher conversions, and expand its ad offerings, but now prefers Twitter (TWTR) and Snap (SNAP).
The company will soon face tough comparisons since the pandemic helped drive online engagement. Anmuth noted the reopening may bring with it slower-than- expected user growth and lower engagement.
Anmuth added: “Slowing user growth is likely to make the shares more controversial at current multiples, and PINS will need to show continued strong monetization to offset the effects of slower engagement.”
Stifel analyst John Egbert maintained a Buy rating but cut his target price to $90 from $100. He wrote that the user-growth outlook “may weigh on sentiment as investors wonder whether large brands will continue to shift budgets to a service struggling to broaden its audience.”
“Although Pinterest’s MAU outlook will likely put a damper on sentiment in the short-term, as the new normal sets in over the coming months / quarters, we thinkPinterest will find stabilization in its audience metrics,” he added.
Egbert also noted that major privacy changes in Apple ‘s (AAPL) latest iPhone software update could cloud expectations for the ad industry in the coming months. That said, he thinks Pinterest is well positioned to navigate the targeted ad space, pointing to factors like high intent to buy things among Pinterest users.
Wedbush analyst Ygal Arounian lowered his price target to $91 from $100 but maintained his Outperform rating.
“The concerns around user growth stalling … are valid, but we believe management has reset the bar conservatively and we’ve expected the pull forward in users from Covid to slow user growth on the other side,” he wrote. “That said, the investor focus here can stall upside in shares in the near term.”
Arounian expects user growth to normalize and resume in the U.S. Meanwhile, he’s more upbeat about Pinterest’s monetization, product efforts, and international opportunity.
“While it might take some time for investors to come around, we’vealways said Pinterest is a monetization growth story more than a user growth story, and the results and guidance fully indicate to us that bull case remains strong,” Arounian wrote. “So while we could see shares trade in a range in the near term, on a 12-month outlook, we see Pinterest well-positioned as a strong social commerce platform.”
Write to Connor Smith at [email protected]
