Pinterest drops almost 20% following decline in users

Shares of Pinterest Inc dropped almost 20% on Friday after it reported a decline in monthly active users (MAU) in the second-quarter earnings.

On Thursday, Pinterest posted it had 454 million monthly active users in the quarter ended in June, slumped more than 5% from the 478 million it posted in the first quarter.

Wall Street expected the company to boost its MAU to 482 million.

“Since mid-March, we believe engagement on Pinterest was disproportionately lower as people began spending more time socializing with friends outside their homes, eating in restaurants, and generally participating in activities that are not our core use cases,” the company said in a letter to shareholders, mentioning that it grew during pandemic lockdowns as its users are more interested towards decor, garden, cooking and DIY.

Pinterest dropped 19.5% to $58.01 on Friday from the previous close of $72.04.

The company also did not provide the third-quarter outlook citing that it lacks “visibility into certain key drivers of engagement” as the evolution of the COVID-19 pandemic and related restrictions remain unknown.

JPMorgan downgraded Pinterest to neutral on Friday, citing concerns about the drop in the number of monthly users and a disappointing third-quarter outlook.

Wells Fargo analysts expressed confidence in the company’s ability to “execute their monetization strategy” but lowered the price target to $85 in response to the drop in the number of users.

“Despite MAU engagement trends coming back to reality from pandemic driven levels, we view PINS shares as attractive given continued ARPU expansion driven by advertiser demand amid easing COVID restrictions,” Wells Fargo analysts said in a note to investors.

Evercore ISI downgraded Pinterest from outperform to in-line and dropped the price target from $98 to $60.

“This is likely a temporary negative inflection in PINS’ lead metric, but it is a negative inflection, and the company appears to have shed many of the new users it gained during the COVID Crisis,” Evercore ISI analysts said in a note to investors Friday. “There is now something of an open question as to whether PINS is experiencing maturation risk in its lead market, the U.S.”

Despite the drop, Pinterest reported revenue of $613 million for the second quarter, which surged more than 125% year over year.

It earned $69.4 million, up from a net loss of more than $100.7 million a year earlier.

Picture Credit: TechCrunch