Pinterest (NYSE:PINS) stock is tumbling 11% in early trading. However, the social media website reported stronger-than-expected first-quarter results and unveiled a new partnership with Amazon (NASDAQ:AMZN).
Investors were disappointed by the company’s guidance, which did not anticipate an acceleration of the firm’s top-line increases and incorporated high spending growth.
Pinterest’s Q1 revenue climbed almost 5% versus the same period a year earlier, surpassing analysts’ average estimate of slightly above 3% growth. Its earnings per share, excluding certain items, came in at 8 cents versus analysts’ mean outlook of 2 cents.
However, its adjusted net income dropped 16% year over year (YOY), while its share-based compensation soared almost 100% YOY to $143 million.
Meanwhile, Pinterest and Amazon announced an advertising deal. Under the agreement, Pinterest will host ads for Amazon that will take Pinterest’s users directly to Amazon’s website. The deal “will be rolled out over several quarters,” Search Engine Land reported.
PINS does not expect the agreement to meaningfully impact its financial results until 2024.
PINS Stock: What the Amazon Deal Means for Pinterest’s Outlook
Pinterest predicts that its Q2 top line will increase by roughly 3.5%-5%, versus analysts’ average estimate of almost 6%. Further, the company expects its operating expenses, excluding certain items, to soar about 13% in Q2 versus Q1.
Investors should try to gauge the extent to which Pinterest can control its expenses and generate an acceleration of its top-line growth. Beginning next year, they should try to determine how the deal with Amazon is impacting Pinterest’s financial results.
Heading into today, PINS had added 2% over the last three months and gained 12% this year.
On the date of publication, Larry Ramer 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.