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Pinterest Inc. shares have lost roughly half of their value over the past 12 months, and a snapback may have to wait.
While the social-media company proved popular early in the pandemic as stir-crazy internet users looked for inspiration online, Pinterest
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had trouble maintaining that momentum once COVID-19 conditions improved and people started leaving their homes more. The company saw disappointing user trends in its two most recent quarters, and Guggenheim analyst Michael Morris is concerned that the company is still suffering from weak dynamics.
Morris downgraded Pinterest shares to neutral from buy Tuesday, while also cutting his estimates on user trends. He now expects the company to report 438 million monthly active users for the fourth quarter, whereas his prior estimate was for 447 million.
Shares of Pinterest were down 9% in Tuesday trading.
Morris looked at data from Pinterest Ads Manager, which indicated to him a decline in “aggregate global audience reach” from November to December and marked the second straight month of sequential drops, though October admittedly saw the “largest total audience reach of 2021.”
He also looked at third-party data from Apptopia, which pointed to a fourth consecutive month of sequential declines in average daily app downloads through Dec. 15.
“With shares under consistent pressure since reporting below-consensus user trends in 2Q21, we have been hesitant to downgrade in front of potential user stabilization,” Morris wrote, but the “data indicating continued usage weakness and another quarter of below-consensus” prompted his most recent call.
He still sees opportunities for Pinterest to capitalize on its “high-purchase-intent user behavior” but has concerns as well about the company’s positioning: “[W]e don’t see the platform’s use case as developing as rapidly as peers, creating risk that competitors improve their social commerce offerings more quickly than Pinterest capitalizes on its position.”
