Pinterest stock jumps more than 20% despite profit loss, as Elliott confirms stake and users remain

Pinterest Inc missed forecasts on earnings and directed lower revenue than analysts had expected in the current quarter, but shares continued to rally in after-hours trading as users paused in a quarter that prompted a sudden turnaround and attracted an active investor.

pinterest pins,
+ 2.62%
On Monday, it 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. Adjusted for stock-based compensation and other influences, the scrapbooking website reported earnings of 11 cents per share, down from 25 cents per share a year earlier. Globally active users declined 5% to 433 million year-over-year, but remained flat compared to the previous quarter, exceeding expectations for a consecutive decline.

Analysts expected adjusted average earnings of 18 cents per share from sales of $665 million, according to FactSet. Pinterest shares jumped more than 20% in after-hours trading after the results were released, having closed up 2% at $19.87.

Just as the quarter was about to end, co-founder Ben Silberman resigned as CEO and was replaced by Bill Reddy, a former Alphabet Inc. Google,
-1.26%

GOOG,
-0.99%
and PayPal Inc. PYPL,
+ 2.35%
CEO who 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, an act that has been criticized so far in 2022 with competitors like Snap Inc. . explode, explode,
-3.44%
and Meta Platforms Inc. mother to facebook META,
+ 0.52%
It shows signs of struggle.

Opinion: Pinterest’s new CEO has a tough road getting users to buy instead of just install

“Pinterest delivered 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 Monday. “We accelerated our investment in shopping and e-commerce this quarter, and I am delighted by the dedication of our leaders and employees to continue building a positive online place.”

Two weeks later, activist investor Elliott Management Corp told the company that it had become its largest investor, according to the Wall Street Journal, and Elliott confirmed its investment Monday afternoon with a press release.

“Pinterest is a highly strategic company with great potential for growth, and our conviction of the value-creating opportunity in Pinterest today has led us to become the company’s largest investor,” Jesse Cohen, managing partner Elliott and senior portfolio manager Mark Steinberg, said in a statement. statement. “As the market-leading platform at the intersection of social media, search and commerce, Pinterest is uniquely positioned in the advertising and shopping ecosystems, and CEO Bill Reddy is the right leader to oversee the next phase of Pinterest’s growth. We commend Ben Silberman and the Board of Directors on the leadership transition.”

“We had a very collaborative and engaging dialogue with Elliott recently,” Reddy said on a conference call Monday. “They are aligned with our vision of what Pinterest can become, they support our team and our efforts, and they see the same huge potential for long-term value creation that I do.”

Stocks rose after initial reports of an Elliott purchase, as investors bet the activist could make a change in the company, or potentially revive reported merger talks with PayPal.

“We think so [stock] The move was largely driven by investor excitement about former Google payments/commerce chief Bill Reedie taking over as CEO, along with activist support from Elliott Mgmt and a recurring market narrative pointing to PINS as a potential acquisition target,” JP Morgan analyst Doug wrote. Unmoth accepted the report.“However, we are somewhat cautious about the basics in print.”

For the third quarter, revenue executives directed “a single-digit average increase on an annual percentage basis” in the third quarter. Analysts, on average, expected third-quarter adjusted earnings of 16 cents a share on sales of $710 million, according to FactSet, which would equal 12% revenue growth from a year earlier.

Reddy suggested Monday that he would look to reduce costs in the future, saying on the conference call that he was “focusing on evaluating the best uses of Pinterest’s capital” and “reviewing our investment profile to understand the return on investment of our expenses and determine the best way to improve in a resource-constrained environment.”

“It’s worth saying that I don’t subscribe to a growth mindset at any cost. While I think we need to invest in long-term growth, I also believe that limitations breed creativity and can lead to better product outcomes. We have a very creative team here,” Reddy said. Although 2022 is the year of investment, I will focus on aligning our investments with our goals of creating a premium experience for our users, helping our existing and new advertisers achieve success on our platform, and delivering attractive returns on our investments for our shareholders.”

CFO Todd Morganfield was more specific, saying, “We will be more strategic and selective in our staffing plans for the remainder of 2022,” adding caution to Pinterest’s revenue guidance and warning that user growth could be slight for the rest of the period. general.

“Many of our advertising partners, especially large retailers, are experiencing supply chain issues, inflation and weak consumer demand. These conditions are impacting advertisers’ ability to spend, with the best indicators of future performance pointing to the slower rate of growth we saw in July,” Morganfield said.

“With the pandemic largely behind us, we believe that MAUs globally will return to more typical seasonal engagement patterns in the second half of the year. These seasonal patterns typically show modest sequential growth as we move into the third and fourth quarters. These trends are a little more muted than in the past,” the CFO said of user growth.

The stock’s rebound in Elliott news has helped stocks recoup some of their losses, but it’s still down more than 45% this year, like the S&P 500 SPX,
-0.28%
13.3%.

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