With the slide in Pinterest (NYSE:PINS) accelerating, it may now be time for investors to sell PINS stock. Like many once high-flying stocks that thrived during the pandemic, Pinterest is now getting crushed. In the past six months, it has fallen 56%. That includes a 19% decline so far in January. Now, it trades at just under $30 per share.
PINS stock is currently 67% below its 52-week high of $89.90, which was reached in February 2021 just before the rotation into value and cyclical securities began. To be sure, the deflation of Pinterest has also been caused by slowing growth, an abandoned takeover rumor and mixed financial results. Shareholders who have held on throughout the tumultuous last year may now want to sell while they still have some gains to protect — or before their losses worsen.
Here’s what you should know about Pinterest moving forward.
PINS Stock and Slowing Growth
Coming out of the pandemic, Pinterest’s growth has been slowing. Arguably the biggest issue weighing down PINS stock is the company’s decline in monthly active users (MAUs). In first two quarters of 2021, the company lost a total of 24 million MAUs. In Q3, it dropped another 10 million. That loss has hurt advertising revenue, which is its primary revenue source. Further, Pinterest has warned that it will likely continue to experience lower levels of user engagement, growth and retention rates as the pandemic subsides. That news has led many analysts and investors to sour on this name.
Other issues hurting PINS include the rumored takeover by PayPal (NASDAQ:PYPL), which turned out to be a big nothing. Additionally, there’s the company’s ongoing struggle to improve monetization of international users. Currently, the average revenue per user (ARPU) on Pinterest is 15 times greater in the U.S. than the rest of the world. Of course, the company says it’s developing a toolkit to boost international monetization, but nothing has materialized so far.
If those struggles weren’t bad enough, though, there’s more. Pinterest has joined other social media companies in claiming that changes to Apple’s (NASDAQ:AAPL) iOS system are hurting its ability to track users on its platform.
Analyst Downgrades
The woes impacting Pinterest have led a number of analysts to downgrade the stock heading into this year. In early January, Guggenheim and Piper Sandler each lowered their price targets for PINS stock. Likewise, Wolfe Research gave the stock a $45 price target. Taken together, these downgrades further eroded sentiment toward shares.
To be fair, the median price target on PINS stock is currently $51, which is 72% higher than today’s price. However, it wasn’t long ago when many analysts had $100 price targets, expecting the stock to continue rallying to new heights.
Pinterest does continue to have fans who point to the fact it has more than 400 million users worldwide and is profitable. The bulls say it’s only a matter of time before PINS bottoms and recovers. However, with the prospect of higher interest rates leading to an exodus from high-value growth and technology stocks — the Nasdaq is down nearly 12% year-to-date (YTD) and heading into correction territory — it’s unlikely shares will rebound in the near term. Pinterest is also widely viewed as a pandemic-era stock; its price rose as people used the platform during lockdowns.
Wait on PINS Stock
All told, Pinterest remains a leading social media company — and the stock could surely recover in time. However, there are too many headwinds pushing against the share price right now and no indications that PINS has bottomed yet.
With shares already down to start the new year, current shareholders would be smart to sell and new investors should wait for signs that the stock has turned a corner before buying in. Given the current environment, PINS stock is not a buy.
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
