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Why Pinterest Stock Jumped on Tuesday

By Daniel Sparks – Oct 5, 2021 at 11:39AM

Key Points

  • Pinterest's revenue is surging, but slowing user growth has spooked some investors.
  • Context helps provide perspective on the company's user-growth headwinds.
  • Is today's gain the start of a rebound?

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With shares losing more than a third of their value over the last three months, has the sell-off gone too far?

What happened

Shares of Pinterest (PINS -2.81%), a provider of a visual search and media discovery platform, had risen more than 2% as of 11 a.m. EDT on Tuesday.

The growth stock's gain was likely due to a bullish day for the overall market, particularly for tech stocks like Pinterest. In addition, shares are likely rebounding a bit, recovering some losses from a steep sell-off lately.

A chart showing a stock price rising.

Image source: Getty Images.

So what

Shares of Pinterest have been slammed in recent months, falling 36% since early July. Over the last 30 days, shares have fallen more than 10%, and that includes today's gain.

Bearishness toward the stock has been driven both by a sell-off of many growth stocks like Pinterest in recent weeks, as well as concerns about the headwinds the company is seeing with its monthly active users (MAUs). Growth in MAUs slowed last quarter and even turned negative on a year-over-year basis in the U.S. in July, management said in its second-quarter update. 

MAUs grew 9% year over year in the second quarter of 2021. Then this growth slowed to 5% for the period between July 1 and 27. Monthly active users in the U.S. declined 5% year over year during this same period.

Now what

Some context on the unprecedented catalysts for user growth Pinterest enjoyed in the year-ago quarter helps provide proper perspective to the company's challenges now. In the summer of 2020, many more people were sheltering at home in the U.S., spending more time on their devices. But in the summer of 2021, more people were out and about doing activities locally and even traveling amid a reopening global economy.

Whatever the case, Pinterest stock's sharp sell-off has likely more than compensated for any concerns about the company's user trends. It's not surprising, therefore, to see shares rebounding a bit today.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Pinterest. The Motley Fool has a disclosure policy.

Stocks Mentioned

Pinterest Stock Quote
Pinterest
PINS
$24.86 (-2.81%) $0.72

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