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Pinterest shares tumble 20% as US revenue disappoints

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Via Financial Times

Pinterest failed to generate as much revenue from its US users as expected in the third quarter of this year, as it posted overall revenues below expectations and disappointing guidance in lacklustre results that knocked its shares by more than 20 per cent.

Revenues at the image search platform, which made its stock market debut in April, rose 47 per cent in the third quarter to $279.7m, missing consensus expectations of just over $281m, and representing a slowdown from a 62 per cent growth rate in the second quarter.

While active user numbers increased by 28 per cent year-over-year to more than 322m, analysts noted that US sales growth, and the amount of advertising revenue raked in from those users, was disappointing.

“There was a more than expected slowdown in US revenue growth and revenue per user growth,” said Ali Mogharabi, analyst at Morningstar, adding that this was concerning because advertising is typically “most valuable” in Pinterest’s domestic market.

US revenue grew 39 per cent to $251m and average revenue per user rose 26 per cent to $2.93.

By comparison, Pinterest’s overseas revenues increased by 212 per cent to $28m — but average revenue per user only stood at 13 cents this quarter. The company expanded its ads business to 28 countries in the quarter, up from 19 at the end of the second quarter.

Its shares tumbled more than 20 per cent on the news to trade at $20.09.

Pinterest was one of this year’s flagship initial public offerings, joining other Silicon Valley “unicorns” such as Uber and Lyft. But those bumper IPOs have experienced mixed success, with some investors questioning whether the business models of the ride-hailing apps can ever be profitable.

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Executives at Pinterest said on an earnings call that the company had a “tough comparable”, given the same quarter last year was flattered by the launch and rapid take-up of new products, such as video advertising formats.

Todd Morgenfeld, chief finance officer, said that future growth would “stem around” the launch of other new products, such as ecommerce features that make it easier to buy products through the platform.

Costs and expenses in the third quarter rose 94 per cent to $413m, driven by both research and development and marketing.

The San Francisco-based group lifted the lower bound of its full-year revenue guidance range to between $1.1bn and $1.115bn — but this was just shy of FactSet consensus of a lift to $1.119bn.

However, Pinterest revised its adjusted losses before interest, taxes, depreciation and amortisation guidance to between $10m and $30m, an improvement on FactSet estimates of $32m in losses.

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