Pinterest Falls on Mixed Report but CEO Comments Give Investors Hope

Shares of Pinterest (NYSE:PINS) are down on Tuesday after the social media company reported worse-than-expected revenue for the fourth quarter and issued a tepid Q1 forecast.

Pinterest reported revenue of $877 million for Q4, up 4% year-over-year (YoY) though missing the consensus estimates of $886.3 million, according to Refinitiv. The company’s overall sales for 2022 grew 9% to $2.8 billion.

Pinterest reported earnings per share (EPS) of 29 cents, topping the analyst consensus of 27 cents per share. The company’s net income in the quarter stood at $17 million, but it posted a net loss of $96 million for the full year.

Bearish Report vs. Bullish Call

Shares of the social media business initially fell as much as 14% in after-hours trading on Monday before positive updates shared on the earnings call helped the stock to recover the majority of losses. Among other things, the company’s management told analysts on the call that they expect margins to expand this year, therefore implying that the company will announce more cost cuts.

Bill Ready, Chief Executive Officer of Pinterest, said on the call:

“While 2022 started off as an investment year, we took steps to cut down on costs in this challenging macroeconomic environment starting in early Q3. And we are continuing to find ways to reduce our expenses so that we can meaningfully expand EBITDA margins.”

The earnings report showed that the number of Pinterest’s global monthly active users (MAUs) rose 4% from the year-ago quarter to 450 million. Its average revenue per user (ARPU) in the US and Canada region surged 6% YoY to $7.60.

“While the industry as a whole is facing headwinds, we are adapting quickly to a changing macro environment and are committed to creating a more positive online experience for our users and advertisers,” Pinterest CEO Bill Ready said in a statement.

Looking ahead, Pinterest expects its Q1 2023 sales to rise in the “low single digits” from the same period last year, while analysts were estimating a 6.9% growth to $614.8 million.

Meanwhile, Pinterest’s Chief Financial Officer Todd Morgenfeld is expected to leave the company on July 1, 2023. The company’s chief marketing and communications officer Andréa Mallard and chief revenue officer Bill Watkins will now report directly to its CEO Bill Ready, who joined the San Francisco, California-based company in June 2022 to replace Ben Silbermann.

Macro Headwinds vs. Industry Tailwinds

Pinterest’s latest Q4 report came on the heels of a series of weaker-than-expected earnings results by ad-dependent companies. Last week, Facebook owner Meta Platforms (NASDAQ:META) said its Q4 sales fell 4% YoY to $32.2 billion.

Similarly, Alphabet’s google ad unit reported a 3.6% drop in quarterly revenue to $59 billion, while its YouTube business fell 8% YoY to $7.96 billion in Q4. Sales of the camera and social media company Snap (NYSE:SNAP) declined to $1.3 billion YoY, just below the analysts’ estimates of $1.31 billion.

Given the slowdown, Pinterest reduced its workforce by 150 employees last week, joining the likes of Meta, Alphabet (NASDAQ:GOOGL), Salesforce (NYSE:CRM), and other tech companies that announced layoffs recently to cut costs. The actions come after Pinterest decided to close its “Creator Rewards” program last November so it could better focus on other projects.

On the other hand, shares of social media companies received a minor boost after Texas governor Greg Abbott announced a plan to ban TikTok from government-issued devices and networks in the state, citing “security risks” associated with the use of the popular short-form video app which “must not be underestimated or ignored.”

The move comes just several weeks after a December order to clamp down on the use of the China-based platform. Abbott said in a statement:

“Owned by a Chinese company that employs Chinese Communist Party members, TikTok harvests significant amounts of data from a user’s device, including details about a user’s internet activity.”

The statewide plan aims to prevent the download or use of TikTok and other banned technologies on government-issued devices such as laptops, cellphones, desktop computers, and tablets.

Further, the ban also prevents employees and contractors from doing state business on devices using prohibited technologies and apps. In addition, it forbids consumers from using TikTok and other prohibited technologies on state-issued internet networks.

Abbott added it is crucial that government agencies and employees remain “protected from the vulnerabilities” TikTok and other prohibited technologies present. Texas-based government agencies must implement policies to support the statewide ban until February 15.

The move comes less than two months after the Senate unanimously voted to pass the legislation aiming to ban TikTok on government-issued devices for federal employees. The TikTok ban is widely seen as a positive for the company’s main competitors - Meta’s Facebook, Google’s Instagram, and Snap’s Snapchat.

Summary

Pinterest shares are trading modestly lower on Tuesday after the social media business reported mixed results amid intensifying macro headwinds. Still, some positive updates and guidance clues helped shares recover initial losses as ad-dependent businesses continue to struggle with the ongoing spending slowdown.

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Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.