Pinterest (PINS) - Get Pinterest, Inc. Class A Report shares plunged lower Friday after the image-sharing social media group reported disappointing gains in active users that overshadowed an otherwise solid second quarter earnings report.
Pinterest said overall monthly active users rose only 9% from last year to 454 million, well shy of the Refinitiv forecast of $487.1 million, and much slower than the 30% gains recorded over the first three months of the year. U.S. users fell 5% to 91 million, compared to a 9% gain in the first quarter.
Revenues more than doubled to $613 million, firmly topping analysts' estimates of a $562.1 million tally, while non-GAAP earnings were pegged at 25 cents per share, more than 10 cents ahead of the Street consensus forecast.
"The first question is what happened with user behavior? As we all know, the pandemic was an unprecedented and unique global event," CEO Benjamin Silbermann told investors on a conference call late Thursday. "In past earnings calls, we talked about how stay-at-home orders significantly increased usage of Pinterest. And for the past year, we've highlighted how people came to Pinterest for inspiration to reinvent their lives during such a difficult time."
"Now as the world opens up, we're seeing the similar effect in the opposite direction," he added.
"That impacted our growth, particularly because some of the core use cases we see on our platform are less common in 2021 than they were a year ago. That shift in behavior in Q2 impacted engagements."
Pinterest shares were marked 17.5% lower in early trading Friday to change hands at $59.55 each, a move that would erase all of the stock's gain for the year.
"While second quarter sales and adjusted earnings were better than expected, thanks, in part, to an easy comparison from the pullback in digital advertising revenue at the start of the pandemic, domestic user engagement remains an issue, into the third quarter," said D.A. Davidson analyst Tom Forte, who carries a neutral rating with a $76.00 price target on the stock.
"Pinterest officially launched Idea Pins in May, allowing creators to better engage with their followers through a video format," he added. "The number of Idea Pins has gone up 7x and its views have increased 10x since January. This segment is still in infancy, but we believe it may sustain high top-line growth for many quarters."