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What happened
Actions of Pinterest (NYSE: PIN) plunged 18% on Friday after the social media platform reported disappointing second-quarter results.
So what
Pinterest revenue climbed 125% year over year to $ 613.2 million. Its net profit, meanwhile, improved to $ 69.4 million from a loss of $ 100.7 million in the prior year period. The gains were fueled by sharp increases in average revenue per user (ARPU), as advertisers increased their spending on Pinterest’s platform during the pandemic.
The Pinterest share price fell sharply on Friday. Image source: Getty Images.
But while Pinterest reported a 9% increase in the number of monthly active users globally to 454 million, it saw its MAUs in the United States drop 5%, to 91 million. This has raised concerns among investors that the social media star has reached saturation point in her most important market.
Now what
With millions of people stuck at home, new users flocked to Pinterest as the COVID-19 crisis began. But as the economy reopens and people spend more time outdoors and offline, the growth of the image-sharing site is slowing. Management expects Pinterest’s revenue growth to slow to “the low 40% range” in the third quarter.
Even more concerning is the decline in business usage statistics in the United States. If Pinterest has hit a cap on new users in its most profitable market, investors may need to limit their long-term profit expectations.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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