Pinterest Inc. missed expectations for earnings and drove for lower-than-expected revenue from analysts this quarter, but shares still rose in after-hour trading as users stayed in a quarter that led to sudden changes and attracted an activist investor.
Monday posted a second-quarter loss of $ 43.1 million, or 7 cents per share, on sales of $ 665.9 million, compared with $ 613 million a year ago. After adjusting for stock-based compensation and other bills, the online scrapbooking site posted earnings of 11 cents per share, down from 25 cents a year ago. Global active users fell 5% to 433 million year-over-year, but remained stable from the previous quarter, beating expectations of a sequential decline.
Just as the quarter was drawing to a close, co-founder Ben Silbermann stepped down as CEO and was replaced by Bill Ready, a former GOOGL of Alphabet Inc.,
and PayPal Inc. PYPL,
longtime executive focused on e-commerce. Many analysts took the move as a signal to Wall Street that Pinterest was trying to shift its focus on becoming a stronger player in ecommerce instead of relying on online advertising, a business that has been slammed so far in 2022. with rivals such as Snap Inc.. HURRY,
and the parent company of Facebook Meta Platforms Inc. META,
showing signs of struggle.
Opinion: Pinterest’s new CEO faces a tough road to get users to buy instead of just blocking
“Pinterest achieved 9% year-over-year revenue growth in the second quarter, or 10% revenue growth on a constant currency basis, despite the uncertainty our advertisers face,” Ready said in a statement Monday. . “We accelerated our investments in shopping and e-commerce this quarter and I am thrilled with the dedication of our leaders and employees in continuing to build a positive place on the Internet.”
A couple of 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 his investment Monday afternoon in a press release.
“Pinterest is a highly strategic company with significant growth potential and our belief in Pinterest’s value creation opportunity today has led us to become the company’s largest investor,” said Jesse Cohn, Managing Partner of Elliott, and Marc Steinberg, Senior Portfolio Manager. declaration. “As the market-leading platform at the intersection of social media, search and commerce, Pinterest holds a unique position in the advertising and shopping ecosystems and CEO Bill Ready is the right leader to oversee Pinterest’s next phase of growth. We commend Ben Silbermann and the leadership transition advice. “
“We recently had a very collaborative and engaged dialogue with Elliott,” Ready said in a conference call on Monday. “They align with our vision of what Pinterest can become, support our team and our efforts, and see the same huge long-term value creation potential that I do.”
Shares rose after initial reports of buying Elliott, as investors bet on the activist forcing change in the company or the potential revival of the reported merger talks with PayPal.
“We believe it [stock] the move was largely driven by investor enthusiasm for Bill Ready, former Google Payments / Commerce Manager, who stepped in as CEO, along with support from Elliott Mgmt activists and a recurring market narrative suggesting PINs as a potential acquisition target, “JP Morgan analyst Doug Anmuth wrote prior to the report.” That said, we are fairly cautious about the fundamentals in the press.
For the third quarter, executives drove revenue to “grow at an average figure on a year-over-year percentage basis” in the third quarter. Analysts had expected third-quarter adjusted earnings on average of 16 cents for a $ 710 million share of sales, according to FactSet, which would equate to revenue growth of 12% over the previous year.
Ready suggested Monday that it will seek to reduce costs in the future, stating in the conference call that it “was focused on evaluating the best uses of capital for Pinterest” and “reviewing our investment profile to understand the return on investment of our expenses and for determine the best way to optimize in an environment with limited resources ”.
“It is worth saying that I do not adhere to a growth mentality at all costs. While I believe we need to invest in long-term growth, I also believe that constraints generate 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 to achieve success on our platform and generate attractive returns on our shareholder investments ”.
CFO Todd Morganfeld was more specific, stating “We will be even more strategic and selective in our hiring plans for the remainder of 2022,” adding caution to Pinterest’s revenue guide and warning that user growth may be mild for the rest of the year.
“Many of our advertising partners, especially large retailers, are experiencing supply chain problems, inflation and weakening consumer demand. These conditions are weighing on advertisers’ spending power and, as best signs of future performance, suggest a slowdown from the growth rate we saw in July, ”Morganfeld said.
“With the pandemic largely behind us, we believe global monthly active users will return to more seasonal and more typical seasonal engagement patterns in the second half of the year. These seasonal patterns typically show modest sequential growth as we move to. Q3 and Q4. However, these trends may be a little more muted than they have historically been, “the CFO said on user growth.
The stock’s rebound on Elliott’s news helped the stocks recoup some of their losses, but they are still down more than 45% this year as the S&P 500 SPX Index,
decreased by 13.3%.