Pinterest: Deception
29 April 2021
Pinterest released disappointing results on Tuesday night. On Wednesday, the stock was down 14% (noting that this only takes it back to its price at the beginning of the year).
I had previously written about Pinterest back in January and February I'm focusing on this one because it's symptomatic of the current markets - it's the "Best Pick 2021" for the Motley Fool site, whose subscribers are those young players who came to the markets thanks to pandemic. In these two posts, I thought things were going to get complicated for this stock. This is being confirmed.
On the one hand, the number of subscribers in the US, Pinterest's main market, has not grown for 3 quarters: 98 M users, not more.
Then the revenue per user is growing a little but not much. And that makes sense: if you take it back to the time spent on the platform, an ad on Pinterest is worth about the same as on Facebook or Instagram.
Finally, the guidance just given by management for the next quarter is well below market expectations - it's even below our expectations, that's all.
In fact, we have a similar situation with Snapchat: these companies experienced an acceleration in sales with COVID, but that is fading. By doing some simulations, we think that within 6 months the growth of these companies will be around 30% instead of the 50% that the market expects. Stock prices will have to adjust.
Have a great week,
Charles
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