Sunday, February 25, 2024

Pinterest shares drop on weak outlook, revenue miss

A display for image sharing and social media service Pinterest is seen at the Collision conference in Toronto, Ontario, Canada, June 23, 2022.

Chris Helgren | Reuters

Pinterest Shares fell in extended trading Thursday after the company issued weaker-than-expected guidance and reported disappointing revenue. The stock pared some of its losses after Pinterest revealed a new partnership with Google.

  • Income: $981 million versus $991 million expected, according to LSEG, formerly known as Refinitiv.
  • Earnings: 53 cents per share, adjusted, versus 51 cents per share expected, according to LSEG.

Revenue rose 12% from $877.2 million a year earlier, while net income rose to $201 million, or 29 cents per share, from $17.49 million, or 3 cents per share, the previous year.

The number of monthly active users in the fourth quarter increased 11% to 498 million, beating analysts’ estimates of 487 million. The company said its global average revenue per user was $2, lower than analysts’ estimates of $2.05.

Pinterest said first-quarter revenue would be between $690 million and $705 million, which equates to year-over-year growth of 15% to 17%. The middle of that range, $697.5 million, is below analysts’ average estimate of $703 million.

The stock initially fell 28% to an after-hours low of $29.40. After Pinterest CEO Bill Ready announced a “third-party app integration with Google” during a call with analysts, the company’s shares rebounded to $37.82, equivalent to a drop of almost 10%.

Google’s integration is similar to Pinterest’s partnership with Amazon focused on third-party ads, Ready said. Pinterest has touted its partnership with Amazon as key to increasing the company’s overall sales and making it easier for users to purchase the products they see on the app.

Ready, who was president of Google’s commerce and payments business before joining Pinterest in 2022, said the company was “very excited” about the new partnership’s potential to help it better “monetize markets” outside the United States.

“We view Pinterest as significantly under-monetized across the board, but most under-monetized internationally,” Ready said, adding that 80% of its users but only 20% of its sales are outside the United States.

Ready said the Google integration “went live a few weeks ago” and has helped increase “third-party advertising demand.” He said it “did not significantly contribute to revenue” for Pinterest’s fourth quarter, but could help in the first quarter and “going forward.”

Unequal market

The company’s report comes as the broader digital advertising market shows a recovery, with Meta, Alphabet And Amazon all are gaining momentum and growing their respective ad units by double digits in Q4. Data suggests companies are increasing spending on online promotions after reducing it in 2022 and part of 2023 due to concerns about the Ukraine-Russia war and high interest rates.

But not all online advertising companies see the benefits. Snap shares fell 35% on Wednesday after the company reported fourth-quarter sales growth of 5%, below expectations, and the company also issued weak guidance.

Ready said the digital advertising market was improving compared to last year and that retail was the company’s “fastest growing segment.”

“We’re seeing across the advertising industry [that] performance matters more than ever, and we’re winning on that front,” Ready said. “We’re driving more performance than ever for advertisers.”

Although Pinterest noted last quarter that the crisis in the Middle East had caused some advertisers to pause spending, the company’s chief financial officer, Julia Donnelly, told analysts that the war between Israel and Hamas ultimately took its toll. a temporary impact.

Before Thursday’s report, Pinterest shares were up 9.5% this year after surging 53% in 2023.

Costs fell about 10% from last year to $785 million, largely due to a drop in sales and marketing spending. A year ago, Pinterest cut about 5% of its workforce, part of an industry-wide downsizing.

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