Pinterest tops earnings estimates, but misses on user growth expectations

Ygal Arounian, VP of Wedbush Securities’ equity research, discusses Pinterest’s first-quarter results, which topped analyst estimates for earnings but missed on user growth expectations.

Video Transcript

MYLES UDLAND: You know, we've got another name that reported last night, I want to ask you about in your coverage area, is Pinterest stock's off about 11% here. And the company said on its call, I mean, shouldn't be a huge surprise that they're mentioning user growth slowing as people sort of are able to go back to doing other things.

But as you think about the business, I guess, longer term, three years ago, people were still quite excited about the Pinterest story, what do you make of it here, just from an analyst perspective, where you've had a lot of pull forward, a lot of interest in the name, and now dealing with some tough comps in a tougher environment here, I think, for the rest of 2021?

YGAL AROUNIAN: Yeah, sure. So look, I think for Pinterest longer term, nothing's really changed in my view of what they are building. And we talked about e-commerce with Google. Social commerce is going to continue to be a really big part and growing piece of e-commerce. And Pinterest is building a great platform for that. They talked about starting to test out native payments and native check out from the platform. That brings a lot of power to it. So they're building out a great tool.

Investors, however, have always been a little bit concerned with Pinterest's engagement and its user growth. And the thing that really sticks out, and why the stock's down today so much, is that not only is user growth slowing, but they got it to a sequential decline in users in the US in 2Q over 1Q. So we're seeing usership actually come down. And so that's going to be a concern in the near term.

I agree, it's not that much of a surprise that, as people go out, engagement's going to come down a little bit. And they did pull forward a lot of growth. I think they'll recapture that as things normalize again a little bit on the other side. But in the near term, there's going to be a lot of focus on that user number and the fact that we're going to see a sequential decline in the US. That's going to be challenging for the stock in the near term, in our view.

JULIE HYMAN: Yes. One of those things that reopening definitely is not necessarily going to have a great effect on.

Nice poster, Ygal. Thanks for joining us. Behind you, I mean.

Ygal Arounian of Wedbush, thanks for being here today.