Pinterest stock is crushed due to disappointing user metrics

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    Despite increasing income, Pinterest (NYSE: PINS) The stock collapsed on Friday following the release of second quarter results, which showed a sequential decline in monthly active users (MAUs). The company’s cautious comments on exposure also rocked investors as people spend more and more time away from home.

    At 11:15 a.m. EDT, Pinterest shares were down 19%.

    The pandemic-induced wave of engagement is cooling off

    Revenue rose 125% to $ 613.2 million in the second quarter, beating the consensus estimate of $ 562.1 million. Global MAUs rose 9% to 454 million, but that rate of growth represents a significant slowdown from the 30% MAU growth Pinterest saw in the first quarter.

    In addition, there were MAUs Low on a sequential basis compared to the 478 million MAUs Pinterest had in the first quarter. Crucially, Pinterest lost 7 million MAUs where monetization is highest. The company attributed the decline to the easing of lockdown restrictions in the United States.

    “Given that many of Pinterest’s core use cases (e.g., decorating, gardening, cooking, home improvement) are particularly relevant at home, we believe we are disproportionately high in the increased time we spent at home during the pandemic lockdown spend, have benefited, “wrote Pinterest in its letter to shareholders. “However, since mid-March we believe that engagement on Pinterest has been disproportionately lower as people started spending more time with friends outside of their homes, eating out in restaurants, and generally participating in activities that are not our core use cases.”

    On the plus side, Pinterest continues to make strides in bolstering overall monetization, which is critical to the bullish thesis. Average revenue per user (ARPU) has increased significantly on all fronts.

    segmentARPUYear-on-year growth
    US$ 5.08103%
    International$ 0.36163%
    Global$ 1.3289%

    Data source: Pinterest.

    Pinterest sees a certain momentum in expanding the e-commerce functions on the platform and partnering with it Shopify (NYSE: SHOP) is helping drive this initiative. The company also recently launched Automatic Bidding for Awareness to streamline the bidding process for advertisers.

    It all resulted in adjusted net income of $ 169.9 million, or $ 0.25 per share. Wall Street analysts were expecting just $ 0.13 per share in adjusted earnings.

    Dark prospects in the short term

    Pinterest expects its engagement headwinds to continue in the future, although there is still a lot of uncertainty. Due to the lack of visibility, the company declined a MAU instruction. Sales growth is also expected to slow down, with sales growth in the region of “low 40%” forecast for the third quarter.

    Combine those top-line prospects with higher operating costs – Pinterest continues to invest in long-term growth strategies – and Pinterest’s profitability is likely to be limited.

    “In order to build a new ecosystem for creative people, we have to invest, and that means that we distribute Idea Pins at the expense of high-quality advertising inventory, which has an impact on sales,” commented CFO Todd Morgenfeld on the conference call with analysts.

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    Evan Niu, CFA owns shares of Pinterest. The Motley Fool owns shares of and recommends Pinterest. Millennial Money is part of The Motley Fool Network. Millennial Money has a disclosure policy.

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