What happened
Shares of Pinterest (PINS 5.03%) were heading lower last month after the online pin board turned in an underwhelming earnings report, its first as a publicly traded company. An initial round of analyst ratings, macro headwinds from the trade war, and general volatility following its IPO in April also seemed to move the stock during the month. Shares finished the month down 20% according to data from S&P Global Market Intelligence.
As you can see from the chart below, the stock had a number of ups and downs, though its biggest sell-off came on May 17, when it lost 13.5%.
So what
In its first earnings report as a publicly traded company, Pinterest said revenue increased 54% to $201.9 million, which edged out analyst expectations of $200.6 million. However, the market seemed to punish the stock for posting a wider-than-expected loss as Pinterest reported an adjusted loss per share of $0.32 compared to expectations of just a loss of $0.11.
Image source: Pinterest.
Despite the shortfall on the bottom line, Pinterest's quarter still seemed solid as monthly active users increased 22% to 291 million, and average revenue per user increased 26% to $0.73, showing the company is bringing new users onto the platform and extracting more advertising revenue from each new user.
CFO Todd Morgenfeld said:
Pinterest executed well in Q1 ... We were particularly encouraged by the strength we saw in U.S. revenue and international user growth. Our strong revenue performance allowed us to expand net margin by 20 percentage points year-over-year, reflecting our continued prioritization and disciplined execution across our strategic priorities.
The market also seemed disappointed by Pinterest's full-year revenue guidance of $1.055 to $1.08 billion, about 50% above the 2018 figure, which was short of the analyst consensus at $1.09 billion. Pinterest called for an adjusted EBITDA loss for the year of $45 million to $70 million.
Now what
Pinterest's sell-off last month should be viewed in the larger context of the stock's performance since its IPO on April 18. After pricing its shares at $19, the stock surged 28% on its opening day and still finished May slightly above that point. The stock has already recouped most of its losses from May, rallying 15% so far in June on bullish macro news.
Like most IPOs, the market is still struggling to find an equilibrium for the stock, especially as Pinterest has no true peer on the market. Though the company will need to show progress on the bottom line, it's (small-f) foolish to dismiss the stock after just one earnings report.
