What the Covid-19 pandemic gave
‘s growth, it can also take away.
Pinterest (ticker: PINS) stock is plunging more than 18% to $58.79 in Friday trading, after the image-sharing platform disclosed Thursday that easing lockdown restrictions are damaging its user growth. Wall Street analysts showed little mercy.
According to a Barron’s count, at least half of the 28 analysts covering Pinterest slashed target prices, and several downgraded Pinterest stock. The average target price is now $59.46. Before earnings it was nearly $80.
Late Thursday, Pinterest said that its monthly active user, or MAU, count fell by 5% or about 20 million users in the second quarter, compared with the first. It further disclosed declines in U.S. MAUs, through July up until Tuesday, reporting a 7% drop, though globally its user count grew 5%.
To his credit CEO Ben Silbermann directly addressed the issue on the conference call Thursday. The boss told investors the company had seen a big boost to its user base as people were stuck inside. Now that pandemic restrictions are easing in some parts of the world, that trend has reversed to some extent.
“Now, as the world opens up, we’re seeing the similar effect in the opposite direction,” he said.
Evercore ISI analyst Mark Mahaney downgraded shares to an In Line rating from Outperform, cutting his target price to $60 from $98.
In the research note, Mahaney contrasted Pinterest’s reopening performance with
(TWTR). As the lockdown orders took effect last year, Pinterest made the largest relative boost to users among the large social-media companies, and Twitter received the second-biggest increase in users.
But, Pinterest shed seven million users in the U.S. from the first quarter, compared with Twitter’s loss of one million U.S. users. Twitter also grew U.S. user count 11% compared with the year-ago quarter, Mahaney wrote.
Mahaney noted that changes to Google Search had a negative impact on Pinterest’s user trends, and said the company pointed out that its more-lucrative mobile users grew modestly in the U.S. and globally by 20% compared with a year ago. Mobile users are a “significant majority” of Pinterest’s revenue, Mahaney said.
J.P. Morgan analyst Doug Anmuth, too, trimmed his target price, and downgraded shares to Neutral from Overweight. Anmuth’s new target of $68—previously $95—reflects a multiple of 10.5 times his estimated 2023 revenue of $4.3 billion. Anmuth said in the note that second-quarter’s results has triggered concern about the future MAU growth after the company’s pandemic-related gains.
Anmuth is also concerned with the company’s plans to shift Pinterest’s main product from its existing “browse and save ideas” model, to a destination for its users to connect with creators. “Idea Pins” operates across 22 markets as of the second quarter, and has received some positive early traction, Anmuth wrote.
But his team is concerned that in the near term, the company could suffer hiccups as users switch to watching richer streaming and video content. The new types of media might not work across all its categories, Anmuth wrote.
Pinterest stock has had a tough year so far, falling 11%, as the
S&P 500 index
Write to Max A. Cherney at firstname.lastname@example.org