Pinterest stock slid Friday after the digital pinboard operator posted its second-quarter results. Earnings slightly missed estimates while a recent rally for Pinterest stock and strong Q2 results from social media rivals Meta Platforms and Reddit raised expectations.
"Following a 59% rebound in stock price after the selloff following Liberation Day, Pinterest is giving back roughly 10% after-hours tonight, largely because digital ad expectations have been building through earnings season," New Street Research analyst Dan Salmon wrote to clients following Pinterest's Thursday report.
San Francisco-based Pinterest earned an adjusted 33 cents per share for the June-ended quarter, up 37.5% compared to the same period a year earlier. That was short of the 35 cents per share that analysts polled by FactSet forecast. Sales increased 17% to $998 million, beating analyst estimates of $975 million.
For the current quarter, Pinterest guided for sales of $1.04 billion at the midpoint of its range, coming in just ahead of previous analyst forecasts. Total monthly active users for Pinterest grew 11% to 578 million. That beat estimates of 574.5 million.
"I've never been more confident in Pinterest's ability to deliver for our users and advertisers," Pinterest Chief Executive Bill Ready said in a news release. "We've found our best product market fit ever by becoming a personalized shopping destination for users and an AI-powered performance platform for advertisers."
On the stock market today, Pinterest stock is down more than 8% at 35.85 in recent trading.
Pinterest's Growth Strategy
On a call with analysts Thursday, Ready touted that AI tools from Pinterest are improving the "actionability" of its advertising. Ready took over Pinterest's top job in June 2022 and has focused on helping drive more shopping directly from the platform, which often has users sharing fashion and home-design images.
Offering stronger advertising based on those interests could help Pinterest compete against Facebook and Instagram for performance-based advertising, where advertisers pay based on outcomes such as clicking though to a product page. A big part of that strategy is a partnership struck in 2023 with Amazon.com to display Amazon product ads on Pinterest feeds.
Pinterest last year struck a similar deal with Alphabet to display ads purchased through Google in international markets. Pinterest's user base is growing fastest outside the U.S. and Canada but it has struggled to monetize its international presence. The average Pinterest user in the U.S. and Canada brought $7.29 in revenue, compared to an average of $1.74 in revenue per users in the rest of the world. The Google deal is part of an effort to boost its international monetization.
That combination of strategies has helped Pinterest win support among Wall Street analysts.
"We think shares are attractive owing to a clear strategy and consistent execution on multiple growth levers, combined with a reasonable valuation and lower risk profile than other mid-size social media platforms," New Street Research's Salmon wrote to clients Thursday. He rates the stock a buy.
Pinterest Stock: Tariffs Hit E-Commerce Advertising
Earlier this week, shares of Snapchat parent Snap took a big hit after its revenue growth came up short. Analysts compared Snap's growth to the strong performances from the much-larger Meta Platforms, as well as the rapid growth of Reddit's relatively new digital ad business. Each of the companies is competing for digital advertising spending.
Pinterest is up against the same comparisons. It is "hard to keep up with ad Joneses" as Bernstein analyst Mark Shmulik wrote in a client note Thursday.
He rates Pinterest as outperform, or buy. But the Bernstein analyst noted that Pinterest's 11% U.S. advertising growth was a slowdown from the 12% in Q1.
"The 3Q revenue guide of 15%-17% growth was fine in isolation, though lagged more optimistic peer guidance," Shmulik added. "Investors dreaming of a hockey-stick like inflection may want to look elsewhere."
While tariffs haven't hit the digital advertising market as badly as investors once feared, Pinterest acknowledged they are feeling some effects.
"Asia-based e-commerce retailers pulled back spend in the U.S. tied to the change in the de minimis exemption," Pinterest Chief Financial Officer Julia Donnelly told analysts Thursday.
Pinterest Stock Jumps 35%
Coming into trading Friday, Pinterest shares had gained 35% year to date.
Overall, Pinterest's share performance has been uneven though this year. The stock jumped out to a big gain after Pinterest's fourth quarter results impressed investors in February. But shares then slumped in the spring, as investors debated the impact of tariffs on the digital advertising market.
Pinterest stock has an IBD Composite Rating of 97 out a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
