Shares of Pinterest fell about 20% before the opening bell in the US on Friday and were set to start trading at more than a three-month low, after the company warned of slowing user growth in the US, its largest market.
At least eight brokerages cut their price target on the stock, which fell to US$57.60 in pre-market trading. If the losses hold, about $9-billion would be swiped off its market capitalisation.
JPMorgan made the most aggressive cut and slashed its target by $27 to $68, pushing it well below the current median price target of $77, citing lower-than-expected user additions in the latest reported quarter and disappointing third quarter outlook. The brokerage also cut its rating on the stock to “neutral” from “overweight”.
Overall monthly active users, a widely watched metric, rose by only 9% and missed analysts’ expectations in the second quarter. It had risen 30% in the prior quarter.
The company also said that user growth in the US was decelerating as people who used the platform for crafts and DIY projects during the height of the pandemic step out more as curbs ease.
Transitory
“This performance suggests lockdown benefits were more transitory than anticipated, while an apparent growing pivot towards the ‘creator economy’ does raise concern regarding structural engagement trends,” James Cordwell, analyst at Atlantic Equities said in a post-earnings note.
Of 30 analysts covering Pinterest, 19 rate the stock “buy” or higher, 10 “hold” and one recommends “sell”.
Pinterest shares, which were the biggest losers among New York Stock Exchange-listed stocks pre-market, have fallen about 9% so far this year compared to an 18% rise in the broader S&P 500 index. — Reported by Eva Mathews in Bengaluru, (c) 2021 Reuters