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Pinterest investments are looking perilous

Russell Kidson

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The situation is not looking good for Pinterest stocks. The photo-sharing platform has reported missed earnings and zero user growth during the platform’s most recent quarter. As has become a trend among other tech companies, Pinterest attributes its poor performance to the pandemic, a decline in search engine traffic, TikTok’s rise, and broader macroeconomic uncertainty. 

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Pinterest isn’t alone, however. Both Meta and SnapChat underwhelmed predictions and projections in terms of stock price. Unfortunately, Pinterest’s Q2 results are well below Wall Street’s estimates which were at $667 million. In reality, the company reported revenue being up 9% yearly, having only reached $665 million. In the words of the Wall Street Journal, this is the lowest revenue growth in the last two years. Additionally, the company reported a net loss of $43.1 million and adjusted earnings of 11 cents per share, down from 18 cents. 

Pinterest investments are looking perilous

Moreover, it warned investors that revenue growth for the third quarter would be in ‘mid single digits’. At the same time, analysts had previously predicted that the company would see revenue growth of around 12.7%. 

The number of monthly active users remained flat at 433 million, down 5% from the previous quarter. Even so, it was one of the few rays of hope amid otherwise troubling news, since analysts had predicted a bigger drop to 431 million. According to Pinterest’s letter to shareholders, “work still needs to be done” to grow its users, particularly in mature markets such as the U.S., Canada, and Europe. 

Pinterest popped 20 on earnings that weren’t as terrible as expected

TikTok represents a broader shift in the market to video as a lead-in to e-commerce transactions, while Pinterest is primarily an image-based bookmarking service.

‘Recommendation media’ also replaces traditional social networks with creator-filled feeds that are driven by algorithms, rather than posts from friends. In an attempt to navigate this change, Pinterest has offered video creation tools to creators. This is reflected in the fact that 10% of the time spent on the platform is now spent watching videos.

According to the company’s analysts, it expects operating expenses to increase in Q3 by a low double-digit percentage as a result of a mid-September to October launch of a new global branding campaign. In addition, the company plans to continue investing in native content and creator initiatives.

If this is your first exposure to the world of Pinterest, here’s a comprehensive guide on what it is and how it works.

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