Pinterest Shares Drop After User Growth Miss

Pinterest Reports Strong Revenue Growth Amidst User Growth Concerns

Last week, Pinterest’s stock experienced a surge following Snap’s announcement of its strongest quarterly performance in four years. Investors anticipated a similar resurgence in advertising expenditure for Pinterest’s visually-focused social media platform.

These expectations now appear validated, as Pinterest exceeded earnings projections with second-quarter revenue reaching $613.2 million and earnings per share at 25 cents, surpassing analyst estimates.

Stock Decline Despite Positive Financial Results

However, Pinterest’s stock price subsequently declined significantly. This downturn was triggered by the company’s reported monthly active user growth of only 9%, resulting in a total of 454 million users.

This figure fell short of the 482 million users analysts had predicted.

Revenue and Earnings Forecasts

Prior to Pinterest’s announcement, Wall Street had projected revenue of $562.3 million and earnings of $0.133 per share. This represented a substantial improvement compared to the loss of $0.70 per share recorded during the same quarter of the previous year.

While Pinterest successfully met its financial targets, the challenges surrounding user growth prompted a considerable drop in its stock value.

Impact of the Pandemic on User Engagement

The platform initially benefited from increased user engagement and growth during the early stages of the pandemic. However, both metrics slowed in the first quarter of 2021 as COVID-19 restrictions eased.

This deceleration previously caused a more than 10% decrease in the stock price following the release of the first-quarter earnings report.

Following today’s earnings announcement, the stock experienced a decline of over 12% in after-hours trading.

CEO Addresses User Growth Challenges

Pinterest directly addressed the issues related to user growth during the earnings call, attributing the declines to the effects of the COVID-19 pandemic.

“The pandemic represented a globally unique and unprecedented event,” explained Pinterest CEO Ben Silbermann. “We previously discussed how stay-at-home orders led to a significant increase in Pinterest usage.

“For the past year, we’ve emphasized how individuals turned to Pinterest for inspiration to reshape their lives during a challenging period,” he continued. “Currently, as the world reopens, we are observing a comparable effect in the opposite direction, impacting our growth—particularly because certain core use cases on our platform are less prevalent in 2021 than they were a year ago. This behavioral shift in Q2 is affecting engagement,” Silbermann stated.

User Statistics

As of July 27, 2021, Pinterest reported a 7% decrease in monthly active users within the U.S., while global monthly active users increased by approximately 5% year-over-year.

The company highlighted that web users generally exhibit lower engagement and generate less revenue compared to those accessing the platform through mobile applications.

During the second quarter, monthly active users on mobile apps grew by over 20% both in the U.S. and internationally, year-over-year.

Focus on the Creator Industry

Pinterest’s difficulties with user growth and engagement underscore the importance of its strategy to cater to the creator industry for its future success.

The company recently launched Idea Pins, a video-first format enabling creators to showcase their crafts, recipes, fashion, beauty tutorials, projects, and more.

This week, Pinterest introduced new features allowing creators to monetize these pins.

Revenue Growth and Future Outlook

Despite the user growth challenges, the resurgence of ad spending resulted in a 78% year-over-year revenue increase in the first quarter.

The company had predicted an even higher 105% year-over-year revenue growth in Q2.

Today, Pinterest reported a 125% revenue growth—exceeding Snap’s 116% reported in its record second quarter—a result Pinterest attributes to the return of advertisers.