Pinterest Faces Stock Drop Despite Google Partnership Announcement

Pinterest's Stock Drop Despite Google Partnership Announcement | Enterprise Wired

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Pinterest’s Disappointing Revenue and Forecast Lead to Share Decline

Pinterest experienced a significant drop in its shares during extended trading on Thursday following the release of a weaker-than-expected forecast and disappointing revenue figures. The company’s stock initially plummeted by as much as 28%, reaching an after-hours low of $29.40. However, Pinterest managed to recover some losses after CEO Bill Ready unveiled a new partnership with Google during a call with analysts.

Financial Overview and Fourth-Quarter Performance

Pinterest reported a 12% increase in revenue, reaching $877.2 million compared to the previous year. Net income rose to $201 million, or 29 cents a share, up from $17.49 million, or 3 cents a share, in the preceding year. Monthly active users for the fourth quarter rose by 11% to 498 million, surpassing analyst estimates. However, the global average revenue per user was $2, falling short of analyst expectations set at $2.05.

Underwhelming First-Quarter Revenue Forecast

For the first quarter, Pinterest anticipates revenue between $690 million and $705 million, reflecting a year-over-year growth of 15% to 17%. Despite this, the mid-point of the range, $697.5 million, is below the average analyst estimate of $703 million. These projections contributed to the initial decline in Pinterest’s stock.

Pinterest’s Google Integration and Recovery

During the call with analysts, CEO Bill Ready announced a “third-party app integration with Google,” leading to a rebound in Pinterest’s shares to $37.82, representing a nearly 10% decline. The Google integration mirrors Pinterest’s existing partnership with Amazon, focusing on third-party ads. Ready expressed excitement about the potential of this collaboration to enhance Pinterest’s monetization efforts, particularly on the international front, where the platform is deemed significantly under-monetized.

Challenges in the Digital Advertising Market

Pinterest’s report comes amid an uneven landscape in the digital advertising market. While Meta, Alphabet, and Amazon have witnessed growth in their ad units, not all companies in the sector are experiencing the same benefits. Snap, for instance, faced a 35% drop in shares after reporting lower-than-expected sales growth and offering weak guidance.

Pinterest’s Cost Reductions and Industry Trends

Despite the challenges, Pinterest noted a 10% decrease in costs from the previous year, totaling $785 million. This reduction was primarily attributed to decreased sales and marketing expenses. Pinterest CFO Julia Donnelly highlighted that the Middle East crisis temporarily impacted advertiser spending but asserted that the company is witnessing improvement in the overall digital ad industry.

Pinterest shares were up 9.5% year-to-date prior to Thursday’s report, following a substantial surge of 53% in 2023. The company remains vigilant in navigating industry trends and maintaining a competitive edge in the evolving digital advertising landscape.

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