Why Pinterest Stock Tumbled Today
Key Points
Pinterest delivered solid top-line growth, but its bottom line came up short.
The company also sees growth slowing into the key fourth quarter.
Pinterest appears to be losing market share to Meta Platforms.
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Shares of Pinterest (NYSE: PINS) were taking a dive today after the image discovery-based social media company posted solid top-line growth, but came up short on the bottom line.
The company also disappointed investors with its guidance for the key fourth quarter.
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As of 10:02 a.m. ET, the stock was down 20.1% on the news.
Image source: Pinterest.
Pinterest stumbles
Pinterest was a breakout star during the pandemic, but since then it's struggled to get its mojo back, even though it's posted steady growth on the top and bottom lines.
In the third quarter, revenue rose 17% to $1.05 billion, matching estimates. Growth was paced by monthly active user growth of 12% to 600 million, and management said that its investments in AI and product innovation are paying off.
Bottom-line growth was also solid with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up 24% to $306.1 million, and its generally accepted accounting principles (GAAP) net income tripled to $92.1 million.
On an adjusted basis, earnings per share rose from $0.32 to $0.38, but that was short of the consensus at $0.42.
CEO Bill Ready said: "We've become a leader in visual search and have effectively turned our platform into an AI-powered shopping assistant for 600 million consumers. In turn, global advertisers are increasingly counting on Pinterest as a go-to search platform to reach their customers and drive sales."
Guidance disappoints as well
Looking ahead to the fourth quarter, Pinterest called for revenue of $1.313 billion-$1.338 billion, reflecting 14%-16% growth from the quarter a year ago, but that was below the consensus at $1.34 billion. The company also sees adjusted EBITDA of $533 million-$558 million for the current quarter.
There was nothing particularly alarming in the results, but Pinterest's growth was notably weaker than Meta Platforms, the parent of Facebook and Instagram, showing that it may be losing market share in the massive digital ad market.
If the company can maintain a high-teens growth rate, it should bounce back over time, but the economy looks volatile at the moment and AI could pose a threat as well.
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Jeremy Bowman has positions in Meta Platforms and Pinterest. The Motley Fool has positions in and recommends Meta Platforms and Pinterest. The Motley Fool has a disclosure policy.
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