Pinterest's (NYSE:PINS) stock recently plunged after the social networking company posted mixed third-quarter numbers. Its revenue rose 47% annually to $280 million, but that marked its slowest growth since the company's IPO and missed estimates by about $2 million.

On the bottom line, it posted a non-GAAP (adjusted) net profit of $6 million, compared to a loss of $15 million a year earlier. On a per-share basis, its non-GAAP EPS of a penny beat estimates by a nickel. Its adjusted EBITDA of $4 million also marked a big improvement from its loss of $13 million a year earlier. But on a GAAP basis, its net loss widened from $19 million to $125 million, mainly due to $130 million in share-based compensation (SBC) expenses.

Pinterest's iPad app.

Image source: Pinterest.

Pinterest expects its full-year revenue to rise 46%-48%, which barely meets the consensus forecast for 48% growth and marks a slowdown from its 60% growth last year. It didn't offer exact earnings guidance, but it expects an adjusted EBITDA loss of $10 million to $30 million, compared to a loss of $39 million in 2018.

Pinterest's slowing growth and lack of profitability are troubling, especially when rivals like Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) are consistently profitable on a GAAP basis. Do those problems indicate that it's time to dump Pinterest before it slips below its IPO price?

How bad is Pinterest's slowdown?

Pinterest's total monthly active users (MAUs) rose 28% annually to 322 million during the third quarter. Its MAUs in the U.S. grew 8% to 87 million, while its international MAUs surged 38% to 235 million.

YOY growth

FY 2018

Q1 2019

Q2 2019

Q3 2019

MAU (U.S.)

8%

6%

13%

8%

MAU (International)

41%

29%

38%

38%

Total MAUs

23%

22%

30%

28%

YOY = Year-over-year. Source: Pinterest S-1 and quarterly filings.

That growth looks stable relative to previous quarters, but there's a growing concern that Pinterest is running out of room to grow in the U.S. -- which is problematic, because its average revenue per user (ARPU) is much higher in its home market.

Its total ARPU rose 14% annually to $0.90 during the quarter. Its ARPU in the U.S. rose 26% to $2.93, while its ARPU in international markets more than doubled to $0.13. But that marked a significant slowdown from its 40%+ ARPU growth in the U.S. in previous quarters:

YOY growth

FY 2018

Q1 2019

Q2 2019

Q3 2019

ARPU (U.S.)

47%

41%

41%

26%

ARPU (International)

22%

59%

123%

127%

Total ARPU

25%

26%

29%

14%

YOY = Year-over-year. Source: Pinterest S-1 and quarterly filings.

Pinterest's international ARPU growth is encouraging, but isn't offsetting its slowdown in the U.S. yet. Pinterest acknowledged a need to diversify its advertising base in the U.S., update its app, and develop new ad products (like its shoppable pins) -- but that progress seems painfully slow compared to that of its rivals.

Pinterest's "Shop the Look" feature.

Image source: Pinterest.

Snap (NYSE:SNAP), for example, grew its North American ARPU 43% annually to $3.75 last quarter, which outpaced its growth in overseas markets. Facebook's ARPU in the U.S. and Canada rose 25% to $34.55 last quarter.

Pinterest is also struggling to capture younger social media users in the U.S. In Piper Jaffray's latest "Taking Stock with Teens" survey, Pinterest ranked fifth in terms of total user engagement among leading social media platforms with a 25% mindshare, putting it behind Instagram (85%), Snapchat (81%), Twitter (40%), and Facebook (31%).

Ongoing losses and a questionable valuation

Pinterest's non-GAAP earnings and adjusted EBITDA are improving, but its massive GAAP loss and stock-based compensation expenses indicate that it's still burning through the $1.6 billion it raised from its IPO in April. It's also rapidly diluting its existing shares by issuing new shares, as seen in its massive spike in SBC expenses.

Pinterest ended last quarter with $1.03 billion in cash, compared to $1.41 billion in the second quarter. At this rate, Pinterest faces the same long-term threat as Snap -- it could potentially run out of cash before it ever turns a profit.

The other major problem with Pinterest is its valuation. At $20, it trades at about seven times next year's sales. By comparison, Facebook and Twitter both trade at six times next year's sales.

The bottom line

Pinterest's high-growth days aren't over yet, but its slowing ARPU growth in the U.S. is troubling. That slowdown wasn't surprising, but it needed more time for its international business to catch up. It also indicates that Pinterest is struggling to expand beyond its core market of older female users as Instagram and Snapchat attract younger users. I'd personally stick with either Facebook or Snap as my main social media play instead of this niche player.