Pinterest shares tumble in after-hours trading due to weaker-than-expected forecast and disappointing revenue.
The company’s revenue at $981 million, missing the expected $991 million, as per LSEG (formerly Refinitiv).
Earnings stand at 53 cents per share, adjusted, surpassing the expected 51 cents per share, according to LSEG.
Pinterest’s revenue increased by 12% from $877.2 million in the previous year, with a net income of $201 million, or 29 cents a share.
Monthly active users in Q4 rose by 11% to 498 million, beating analyst estimates of 487 million.
Global average revenue per user is $2, slightly below analyst estimates of $2.05.
First-quarter revenue is projected to be between $690 million and $705 million, indicating a year-over-year growth of 15% to 17%, slightly below the average analyst estimate of $703 million.
The stock initially dropped by as much as 28% to $29.40 but rebounded to $37.82 after Pinterest CEO Bill Ready announces a new Google partnership during a call with analysts.
Comparable to Pinterest’s collaboration with Amazon, the Google integration centres on third-party advertisements.
Ready, previously president of Google’s commerce and payments business expresses excitement about the potential of the Google partnership to help monetize international markets.
Pinterest is considered significantly under-monetized globally, with 80% of users but only 20% of sales outside the U.S.
The Google integration, live for a couple of weeks, boosts third-party ad demand.
The broader digital advertising market is recovering, with Meta, Alphabet, and Amazon experiencing growth in their respective ad units in Q4.
However, not all online ad companies are benefiting; Snap shares dropped 35% after reporting lower-than-expected sales growth.
Ready notes an improvement in the digital ad market from the previous year, with retail being Pinterest’s fastest-growing segment.
Pinterest experiences a temporary impact on advertiser spending due to the Middle East crisis, particularly the Israel-Hamas war.
Before the report, Pinterest shares were up 9.5% this year after a 53% surge in 2023.
Pinterest’s revenue of $981 million falls short of the $991 million expected, causing a market reaction.
Earnings per share stand at 53 cents, adjusted, exceeding the projected 51 cents per share.
The revenue increase of 12% from the previous year is a positive sign for the company’s growth.
Net income sees a significant rise, from $17.49 million, or 3 cents a share, in the previous year to $201 million, or 29 cents a share.
Monthly active users show an 11% increase in the fourth quarter, reaching 498 million and surpassing analyst estimates of 487 million.
Global average revenue per user is $2, slightly lower than the anticipated $2.05.
Outlook for the First Quarter: What to Expect
Pinterest projects first-quarter revenue between $690 million and $705 million, indicating a year-over-year growth of 15% to 17%.
The midpoint of this range, $697.5 million, falls slightly below the average analyst estimate of $703 million.
The initial market reaction causes the stock to drop by as much as 28% to an after-hours low of $29.40.
However, after Pinterest CEO Bill Ready announces a new Google partnership during a call with analysts, the stock rebounds to $37.82, resulting in a nearly 10% decline.
Bill Ready, Pinterest CEO and former president of Google’s commerce and payments business, expresses excitement about the potential of the new Google partnership.
Ready sees Pinterest as significantly under-monetized globally, with 80% of users but only 20% of sales outside the U.S.
The Google integration, live for a couple of weeks, has already shown promise by boosting third-party ad demand.
Although not a significant revenue contributor for the fourth quarter, Ready anticipates positive impacts in the first quarter and going forward.
Ready believes the partnership can help Pinterest better monetize markets outside of the U.S., especially internationally.
The broader digital advertising market is showing signs of recovery, with Meta, Alphabet, and Amazon experiencing growth in their respective ad units in Q4.
Businesses are increasing spending on online promotions after cutting back in 2022 and part of 2023 over concerns about the Ukraine-Russian war and high-interest rates.
Snap shares, however, cratered by 35% after the company reported fourth-quarter sales growth of 5%, trailing expectations, and issued weak guidance.
Pinterest’s CEO, Bill Ready, notes that the digital ad market is improving from the previous year, with retail being the company’s fastest-growing segment.
Ready emphasizes that, in the current ad industry landscape, performance matters more than ever, and Pinterest is winning on that front by driving more performance to advertisers than ever before.
Pinterest acknowledges a temporary impact on advertiser spending due to the Middle East crisis, particularly the Israel-Hamas war.
Julia Donnelly, the company’s finance chief, tells analysts that the crisis caused some advertisers to halt their spending, but the impact was ultimately temporary.
The company has been resilient despite global challenges, and Ready remains optimistic about the growth potential, especially with the new Google partnership.
Costs for Pinterest drop about 10% from the previous year to $785 million.
This decrease is primarily attributed to a decline in sales and marketing expenses.
A year ago, Pinterest underwent an industry-wide downsizing, cutting about 5% of its workforce.
The initial market reaction, causing a 28% drop in the stock, reflects concerns about the weaker-than-expected forecast and revenue miss.
The rebound to $37.82, however, indicates investor confidence after the announcement of the new Google partnership.
Pinterest’s historical context, including the previous year’s workforce reduction, shows a strategic approach to cost management and adapting to industry challenges.