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Why Pinterest Stock Dropped 11.5% in February

By Beth McKenna - Mar 5, 2020 at 9:33AM

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Shares of the social media company were taken down by the coronavirus-driven market sell-off last month.

What happened

Pinterest (PINS 8.12%) stock fell 11.5% in February, according to data from S&P Global Market Intelligence. That's not as bad as it might seem at first glance when you consider that the S&P 500 index dropped 8.2% last month. The market sold off on concerns that COVID-19, the illness caused by the recent coronavirus outbreak, could blunt global economic growth.

Shares of the image-sharing platform operator have moved 2.1% lower in the first three trading days of March bringing their year-to-date 2020 gain down to 6.1% through Wednesday. This compares with the broader market's negative 2.8% return. 

A woman's hands holding a white computer tablet showing several Pinterest categories on screen.

Image source: Getty Images.

So what

We can probably safely attribute Pinterest stock's weak performance last month entirely to the market's coronavirus sell-off. 

As the following chart shows, the stock was up solidly in early February before falling along with the market in the latter part of the month when news came out that COVID-19 had spread considerably beyond China, where it originated. That early gain was in response to Pinterest's Feb. 6 release of fourth-quarter 2019 results and 2020 guidance that pleased investors. Shares popped 9.5% on the following day.

PINS Chart

Data by YCharts.

In Q4, revenue jumped 46% year over year to $399.9 million. Growth was driven by a 26% year over year increase in the number of monthly active users (MAUs) to 335 million and a 15% rise in average revenue per user (ARPU) to $1.22. Loss per share based on generally accepted accounting principles (GAAP) came in at $0.06, compared with earnings per share (EPS) of $0.37 in the year-ago period. Adjusted for one-time items, EPS declined 225% to $0.12.

Wall Street was looking for adjusted EPS of $0.08 on revenue of $371.2 million, so Pinterest sprinted by both expectations.

The bottom-line results are moving in the wrong direction because the company is investing heavily for growth following its initial public offering (IPO) in April. 

Now what

There's no need for investors to change their decided investment course on Pinterest stock based on its February move.

The company guided for 2020 revenue of "up to $1.52 billion." This represents growth of up to 33% year over year. Going into the fourth-quarter earnings report, Wall Street had been modeling for 2020 revenue of just $1.11 billion. 


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