Is Pinterest a Buy After Its Latest Earnings?

  • Pinterest (PINS) stock got a lift after the company reported better-than-expected first-quarter earnings.
  • Unfortunately, the rally was short-lived and PINS stock is again on the downslope.
  • The company continues to face pressure from declining advertising and supply chain issues and investors should be wary.
Hand holding Apple Iphone6 gold color with Pinterest app on the screen. In the background, a laptop is open to Pinterest. PINS stock.
Source: photobyphotoboy / Shutterstock

The selloff in Pinterest (NYSE:PINS) stock seemed to take a breather after the social media company reported better-than-expected first quarter earnings, raising the question of whether now is a good time for investors to start accumulating shares?

In the first week of May, PINS stock rose 10% to $24.21 a share after the San Francisco-based company reported earnings that were much better than Wall Street analysts had forecast. Pinterest stock outperformed the broader market, notably the tech-heavy Nasdaq index that continues to slump this year on fears about rising interest rates and slowing economic growth. This raises the question of whether Pinterest’s stock has now bottomed after falling 40% this year, or if this is a brief respite before the share price continues to fall further?

PINS Pinterest $20.22

Stellar Earnings Helped PINS Stock

Pinterest reported impressive first quarter results that showed it earned 10 cents per share compared to the 4 cents that was expected by analysts. The company, which runs an image sharing social media platform, said its Q1 revenue came in at $575 million versus $573 million expected. Looking ahead, the company guided that it expects its revenue for the current second quarter that ends June 30 to be 11% higher than a year ago. Clearly, analysts and investors liked what they saw in the first quarter numbers, along with the forward guidance.

However, not all the numbers in Pinterest’s latest print were positive. The company noted that its global monthly active users decreased 9% from the same period of 2021 to 433 million. Wall Street was looking for 437.9 million total monthly active users in the first quarter, according to data from FactSet. Pinterest blamed the decline in monthly active users on lower search traffic that resulted from Google’s algorithm change initiated last November.

That said, global average revenue per user came in at $1.33 in this year’s first quarter, up 28% from a year earlier. Wall Street had expected average revenue per user of $1.31. This growth shows that Pinterest is managing to get more revenue out of each person that uses its platform.

But Continued Headwinds Have Hurt

Despite the strong earnings, Pinterest said in its shareholder letter that it continues to face “macro headwinds” that include supply chain problems and a decline in mid-market advertising on its platform. Also, the company singled out the ongoing war in Ukraine and said that it has “compounded a difficult macro environment, impacting many of our advertisers in that region.” While the company’s earnings improved, it appears that Pinterest is not completely out of the woods just yet.

Additionally, PINS stock gave up all its recent gains as stocks sold off across the board on May 6 and 9. In those two trading sessions, Pinterest’s share price fell a combined 10% to settle back down under $22. Despite improving financials, it doesn’t appear that Pinterest can overcome the negative investor sentiment surrounding technology growth stocks right now. Year to date, the technology heavy Nasdaq index is down 26%, placing it in bear market territory.

Hold Off on Buying PINS Stock

While its recent earnings were encouraging and showed that Pinterest’s financials are improving, the company’s stock has been unable to maintain a rally and continues to fall backwards, pulled by the ebbing tide of the stock market. In the current environment, it would be very difficult for Pinterest’s share price to meaningfully recover. The market will likely have to bottom before that happens.

In the meantime, investors should keep Pinterest on their watchlist and be ready to buy shares once it is clear that a bottom has been reached and the share price is starting to recover in a significant way. Right now, PINS stock is not a buy.

On the date of publication, Joel Baglole did not have (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 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.

Article printed from InvestorPlace Media,

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