Pinterest Inc. missed earnings expectations and led to lower-than-expected revenue in the current quarter, but shares still jumped in after-hours trading as users braced for a quarter that saw sudden changes and attracted an activist investor .
on Monday reported a second-quarter loss of $43.1 million, or 7 cents a share, on sales of $665.9 million, up from $613 million a year ago. After adjusting for stock-based compensation and other effects, the online scrapbooking site reported earnings of 11 cents per share, up from 25 cents per share a year ago. Global active users fell 5% to 433 million year-on-year, but were flat from the previous quarter, beating expectations for a sequential decline.
Analysts on average expected adjusted earnings of 18 cents per share on sales of $665 million, according to FactSet. Shares of Pinterest jumped more than 20% in after-hours trading after the results were announced, after closing up 2% at $19.87.
As the quarter drew to a close, co-founder Ben Silbermann stepped down as CEO and was replaced by Bill Ready, formerly of Alphabet Inc. GOOGLE,
and PayPal Inc. PYPL,
executive that has long focused on e-commerce. Many analysts took the move as a signal to Wall Street that Pinterest was trying to shift its focus to becoming a stronger player in e-commerce rather than relying on online advertising, a business that has been hit so far in 2022 with rivals such as Snap Inc. SNAP,
and Facebook parent Meta Platforms Inc. META,
shows signs of struggle.
Opinion: Pinterest’s new CEO faces tough road to get users to buy instead of pin
“Pinterest achieved 9% year-over-year revenue growth in the second quarter, or 10% revenue growth on a constant currency basis, despite the uncertainty facing our advertisers,” Ready said in a statement on Monday. “We accelerated our investment in shopping and e-commerce this quarter, and I’m excited by the dedication of our leaders and employees to continue building a positive online presence.”
A few weeks later, activist investor Elliott Management Corp. told the company it had become its largest investor, according to the Wall Street Journal, and Elliott confirmed its investment Monday afternoon in a press release.
“Pinterest is a highly strategic business with significant growth potential, and our belief in the value opportunity in Pinterest today led us to become the company’s largest investor,” said Elliott CEO Jesse Cohn and Senior Portfolio Manager Marc Steinberg . statement. “As the market-leading platform at the intersection of social, search and commerce, Pinterest is uniquely positioned in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader to oversee Pinterest’s next phase of growth. We congratulate Ben Silbermann and the board on the leadership transition.”
“We’ve had a very cooperative and engaged dialogue with Elliott recently,” Ready said on a conference call Monday. “They are aligned with our vision of what Pinterest can be, support our team and our efforts, and see the same tremendous potential for long-term value creation that I do.”
Shares rose after initial reports of Elliott’s purchase, as investors bet the activist was forcing changes at the company or possibly reviving reported merger talks with PayPal.
“We believe that [stock] The move is largely driven by investor excitement around Bill Ready, Google’s former payments/commerce chief, taking over as CEO, along with activist support from Elliott Mgmt and a recurring market narrative that suggests PINS as potential takeover target,” JP Morgan analyst. Doug Anmuth wrote before the exhibition. “Because we’re pretty careful about the fundamentals in print.”
For the third quarter, executives guided revenue to “mid-single-digit growth on a year-over-year basis” in the third quarter. Analysts on average had expected third-quarter adjusted earnings of 16 cents a share on sales of $710 million, according to FactSet, which would have equated to a 12 percent revenue increase from a year earlier.
Ready suggested on Monday that he would look to reduce costs going forward, saying on the conference call that he was “focused on evaluating the best uses of capital for Pinterest” and “looking at our investment profile to understand the return on investment of our expenses and determine how best to optimize in a resource-constrained environment.”
“It’s worth saying that I don’t agree with a growth-at-all-costs mentality. While I believe we should invest in long-term growth, I also believe that limitations breed creativity and can lead to even better product results. And we have an extremely creative team here,” Ready said. “So while 2022 is an investment year, I will focus on aligning our investments with our goals of creating a differentiated experience for our users, helping our existing and new advertisers succeed on our platform and generate attractive returns. from our investments for shareholders.”
Chief Financial Officer Todd Morganfeld was more specific, saying “We will be even more strategic and selective in our hiring plans for the remainder of 2022,” while adding caution to Pinterest’s revenue guidance and warning that user growth may be modest for the rest of the year.
“Many of our advertising partners, especially larger retailers, are facing supply chain challenges, inflation and weakening consumer demand. These conditions are weighing on advertisers’ ability to spend, and as the best signs for future performance point to a slowdown from the pace of growth we saw in July,” said Morganfeld.
“With the pandemic lull largely behind us, we believe monthly active users worldwide will return to more seasonal, more typical seasonal engagement patterns in the second half of the year. These seasonal patterns typically show moderate sequential growth as we move into Q3 and Q4. However, these trends may be a little more muted than they have been historically,” the CFO said of user growth.
The stock’s rebound on the Elliott news helped stocks recover some of their losses, but they are still down more than 45% this year as the S&P 500 SPX,
has fallen 13.3%.