Shares were under pressure Thursday evening following disappointing earnings and that weakness continued into Friday’s premarket trading session.
Pinterest stock was down 19% at $58.27 on Friday at last check.
Ironically, the San Francisco social media services company posted excellent top- and bottom-line results. Really, the numbers were fantastic. However, user growth was very disappointing and that’s spooking Wall Street.
Is it as simple as users are out enjoying the summer sun and traveling while they can or is it a bigger issue than that?
If it’s the former, then the stock’s pain could be short-lived. However, if Pinterest has a prolonged user growth issue, the stock could stagnate for a while.
We’ve seen a mixed bag with social media stocks so far.
Snap (SNAP) - Get Snap, Inc. Class A Report had a great reaction to great results. Facebook (FB) - Get Facebook, Inc. Class A Report slipped lower after solid results but mixed guidance, while Twitter (TWTR) - Get Twitter, Inc. Report rallied but failed to hold onto its gains.
Now throw in Pinterest’s implosion and we have a really mixed bag this quarter.
Trading Pinterest Stock
Above is a weekly chart of Pinterest stock. I like the daily look, but this chart better emphasizes where support has been and where it may come into play.
Specifically, we saw a nice reversal off the $54 area in early May, as growth stocks were hitting a bear-market low. At the time, Pinterest stock was testing down into its 50-week moving average.
However, with the 50-week moving average currently near $65 and with Pinterest opening below $60, it’s clear that level won’t act as support. At least, not right off the bat.
That said, if Pinterest can give bulls a strong bounce, reclaiming this level would be pretty impressive. The risk is that rather than being reclaimed, this measure acts as resistance.
In any regard, I’m keeping an eye on the $54 level. Do we get an undercut of this level and a reclaim? Does it act as support or does it fail to do anything as Pinterest drifts lower?
These are the questions I and many others want answers to.
If it’s tested and ultimately holds as support, traders will have a low to measure against on the long side.
If it fails to buoy Pinterest, it’s possible that this stock goes on to test $50. Below $50 and the 21-month moving average could be in play, as well as the gap-fill level near $46.