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Why Pinterest Stock Slipped on Thursday

By Daniel Sparks – Oct 21, 2021 at 4:50PM

Key Points

  • Could weakness in PayPal stock be threatening a rumored Pinterest buyout deal?
  • PayPal is rumored to be considering buying Pinterest for about $70 per share.

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Buyout rumors continue to drive volatility in Pinterest stock.

What happened

Shares of visual search and media platform specialist Pinterest (PINS -3.07%) slipped on Thursday, declining as much as 3.2%. By the time the market closed, the stock was down about 2%.

The growth stock's decline came after shares surged on Thursday following reports that PayPal (PYPL -2.68%) may have been considering buying Pinterest. Pinterest's decline on Thursday, therefore, likely reflects the stock cooling off as investors wonder whether the rumor will pan out or not. Furthermore, there are concerns that recent weakness in PayPal stock since the buyout rumor started spreading could threaten the deal.

A chalkboard sketch of a chart showing a stock price declining.

Image source: Getty Images.

Now what

Shares of PayPal have now declined more than 10% since rumors started circulating that the company was considering buying Pinterest. The stock's decline implies that the market largely thinks a buyout of Pinterest would be a bad idea.

The bid, rumored to be valued at about $45 billion, or about $70 per Pinterest share, may be viewed as a steep price to pay considering that Pinterest's trailing-12-month net income only amounts to $161 million. However, Pinterest is growing incredibly fast, making lucrative profits likely in the future. The company's trailing-12-month revenue of $2.2 billion is up from $1.7 billion in 2020 and $1.4 billion in 2019. 

Now what

Volatility in Pinterest's stock price will likely persist as investors try to decipher the likelihood of this acquisition panning out. Given the uncertainties surrounding what will happen, investors may want to stay focused on Pinterest's underlying business and their view of the stock's long-term potential as an independent company. There's no guarantee that a buyout occurs.

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 PayPal Holdings and Pinterest. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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