pinterest app

Pinterest (NYSE: PINS) stock is trading sharply higher in US premarket price action today after it reported its second-quarter earnings. The stock’s price action is in stark contrast to other social media stocks.

Meta Platforms and Snap had plunged following their second-quarter earnings. Their earnings also shaved off billions of dollars in market cap from other social media stocks as well. Both these companies missed both topline and bottomline estimates, and Meta Platforms reported the first quarterly revenue decline since it went public.

Twitter also missed both the revenue and profitability estimates and partially blamed Elon Musk’s acquisition drama. The world’s richer person has counter-sued Twitter after the company sued it for backing out of the acquisition deal. Despite the earnings miss, Twitter managed to dodge a sell-off post the earnings.

Among tech companies, Amazon’s earnings stood out. It not only posted better than expected revenues and profits but also provided a bullish Q3 outlook. After the Q2 earnings beat several, Wall Street analysts issued bullish notes and advised buying Amazon stock. JPMorgan raised its target price from $175 to $185 while Deutsche Bank raised its from $155 to $175.

Coming back to Pinterest, the company reported revenues of $666 million in the second quarter of 2022, which were 9% higher YoY and were largely in line with estimates. Its adjusted EPS of 11 cents was however below the 18 cents that analysts were expecting.

While Pinterest missed earnings estimates, its user numbers were better than expected. Its MAUs (monthly active users) fell 5% to 433 million which was better than the 431 million that analysts were expecting.

Social Media Companies are Facing the Heat as Ad Spending Slows

Meanwhile, Pinterest said that strength in specialty and online retailers was “partially offset by lower-than-expected demand from U.S. big box retailers and mid-market advertisers, who pulled back ad spending due to concerns about weakening consumer demand. Our CPG (Consumer Packaged Goods) advertisers also continued to face challenges due to supply chain issues and inflationary pressures.”

Snap and Meta Platforms had also pointed to lower ad spending amid the slowing US economy. Pinterest added, “The macroeconomic environment has created meaningful uncertainty for our advertiser partners.” US economy has slowed down and the GDP fell in the first and second quarters of 2022. The yield curve inversion also points to an impending recession in the world’s largest economy.  Pinterest said that it expects its revenues to rise mid-single digits in the quarter. The guidance assumes headwinds from currency.

Pinterest stock is trading sharply higher today. Uber is also up sharply in premarkets after it posted an earnings beat and posted its first-ever free cash flows. Uber however posted a massive net loss mainly because of losses on its equity investments.

In June, Bill Ready replaced Ben Silbermann as the company’s CEO. Silbermann was a co-founder of the company. Amid the falling stock prices, CEOs of several companies have exited their positions over the last year.

Elliott Management Becomes Largest Pinterest Stockholder

Meanwhile, more than the earnings, the news of Elliott Management, which is led by activist investor Paul Singer, becoming the largest stockholder of Pinterest, seems to be supporting the price action today. Elliott Management usually gets actively involved with the company management and was also instrumental in Alcoa’s split in 2016.

While announcing the stake, Elliott Management said, “Pinterest is a highly strategic business with significant potential for growth, and our conviction in the value-creation opportunity at Pinterest today has led us to become the Company’s largest investor.”

It added, “As the market-leading platform at the intersection of social media, search and commerce, Pinterest occupies 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.”

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