Less Home = Less Pinning? What To Make Of Pinterest Following 14% Drop

Shares of Pinterest Inc PINS fell Wednesday after reporting first-quarter earnings. Analysts were impressed with the strong user growth, but worry about the sustainability of growth after the pandemic.

Pinterest reported quarterly earnings of 11 cents per share, which beat the analyst consensus estimate of 7 cents. The company reported quarterly sales of $485.23 million, which beat the analyst consensus estimate of $473.66 million.

The Pinterest Analysts: Credit Suisse analyst Stephen Ju reiterates a Neutral rating on Pinterest and with a price target of $97.

KeyBanc analyst Justin Patterson reiterates an Overweight rating and lowers the price target from $92 to $89.

Rosenblatt Securities analyst Mark Zgutowicz reiterates a Neutral rating and lowers the price target from $90 to $70.

The Analyst Takeaways: Pinterest reported monthly active users of 478 million.

“We expect investors attention to be on the decelerating monthly active user growth, but the engagement benefits from the pandemic due to the various levels of shelter-in-place were always going to be unsustainable,” Ju wrote in a note.

“Pinterest’s revenue growth was driven largely by eCPM gains in the quarter, especially in performance products,” Patterson said.

Ad load declined year-over-year in the U.S. and globally, which could demonstrate the advertising products resonating with both users and advertisers.

Related Link: Why Pinterest Shares Tanked Despite Q1 Earnings Beat

Patterson lowered the price target while also mentioning shares could be bought on weakness with the company being well-positioned in its shopping category.

“Pinterest’s flat MAU outlook is a wake up call that not all social platform companies can maintain stay-at-home engagement lift as COVID restrictions diminish,” Zgutowicz said. “Less home = less pinning.”

Zgutowicz also lowered MAU and revenue figures for fiscal 2022: “A much flatter US MAU trajectory sets up a higher ‘22E ARPU bar that doesn’t appear likely.”

The analyst noted Pinterest added 6 million net U.S. MAUs in the second quarter, which was the same net adds as the previous 12 months.

Growth Ahead: The primary area of focus for Pinterest should be on growing international users and rolling out a dedicated sales focus in new regions, Ju added.

Pinterest recently launched in Brazil and announced that Mexico will be next. Patterson said there's a long runway for average revenue per user increases for Pinterest.

Pinterest has an ARPU of $25.71 in the U.S. and $2.24 in its international markets.

Zgutowicz pointed to Pinterest’s Story Pins that are similar to offerings from Snapchat and Instagram: “We’re encouraged by the premium-priced ad potential here, however, it is still early days and users have a steep learning curve ahead.”

The key question will be how Pinterest can monetize Story Pins.

{INS Price Action: Shares of Pinterest closed down 14.5% to $66.33.

See also: Buy Pinterest (PINS) Stock