Pinterest Inc. experienced a decline in its stock value following a revenue miss and underwhelming guidance. The company reported a net income of $201.2 million for the fiscal fourth quarter, compared to $17.5 million in the same period the previous year. Adjusted earnings stood at 53 cents per share. Despite a 12% increase in revenue to $981.3 million, analysts had anticipated higher net earnings of 52 cents per share on revenue of $991 million.
The disappointing results caused Pinterest’s shares to initially plummet by 23% after the report was released, before recovering slightly. Ultimately, the stock closed the after-hours session with a 9% decline. Pinterest CEO Bill Ready acknowledged the mixed performance, stating, “We had a strong Q4, bookending a transformative year for Pinterest.”
One positive aspect highlighted in the report was the growth in global monthly active users, which rose by 11% to reach a record high of 498 million. This increase was largely driven by Gen Z users. In an effort to further enhance its advertising capabilities, Pinterest is developing an AI-based automated advertising system. Additionally, Google will join Amazon as a third-party ad-integration partner.
Looking ahead, Pinterest projects first-quarter revenue to fall within the range of $690 million to $705 million, with FactSet analysts predicting $702 million. Julia Brau Donnelly, the Chief Financial Officer of Pinterest, expressed optimism about the company’s performance in Q1, stating that it is “off to a good start.” However, the fourth quarter saw a decline in food and beverage advertising, which impacted overall results.
The earnings report emphasized the significance of ad spending for various tech companies. Meta Platforms Inc., Google, and Snap Inc. all reported substantial growth in ad revenue, making it challenging for Pinterest and others to achieve comparable results. Analyst Jeremy Goldman from Insider Intelligence noted that Pinterest’s Q4 numbers, while solid, may face scrutiny in light of Meta’s exceptional performance the previous week.
Despite the recent setback, Pinterest’s stock has performed remarkably well over the past year, surging by 64%. In comparison, the broader S&P 500 index has increased by 22%. The company will need to navigate the competitive landscape and address the concerns raised by its Q4 results to maintain its positive trajectory.