Pinterest (PINS -0.19%) reported strong revenue growth in the second quarter, evidencing its growing importance in the digital ad industry. However, a sequential drop in monthly active users spooked Wall Street and sent the share price tumbling. Today, the stock trades at 35% below its all-time high.

In this Motley Fool Live video, which was recorded on Oct. 14, contributor Matt Frankel, CFP, shares his thoughts on  Pinterest's third-quarter earnings report, which will be released on Nov. 4. He also highlights why this tech stock still has plenty of upside for investors.

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Matt Frankel: I was going somewhere with that question. [laughs] The reason that they had a bad second quarter is because active user growth was actually negative. Let me go ahead and share my screen. Let me know if you can see that presentation right there. Awesome.

This is Pinterest's active users, monthly active users. So this will count Trevor because he said he uses it monthly. What we are seeing here, the number on top of the bars is Pinterest's total active user base. You can see the total active users actually declined sequentially from the first quarter of 2021 to the second, from 478 million to 454 million. That's not what a social media company typically wants to see. But this wasn't entirely a surprise. What have we been doing the past year or so? We've been stuck inside of our houses doing nothing but playing on the internet. [laughs] Let's be honest.

As things started to reopen, which arguably the second quarter was the most successful in terms of reopening progress to date, including the third quarter. It's not too surprising to see that number contract. U.S. users actually declined year over year. That's that red part on the bottom, which makes up about 20% of Pinterest's user base. It was 96 million a year ago. It's down to 91 million now, active Pinterest users in the U.S. That's what the market's really going to be looking for. That's what will move the stock if it looks like that trend is reversing course or at least stabilizing, which I think with the delta surge, we might actually see it reverse course a little bit. You saw a reversal in the reopening during the third quarter. I'm curious to see how that translated to more people staying inside and playing on the internet. That's one thing I will be watching. But as an investor, that's not really what I care about the most.

This is what I care about the most right here. Pinterest average revenue per user. How well is it monetizing its user base? If you look at U.S. users, the average U.S. user of Pinterest generated a little over $5 of revenue for the company in the second quarter, the average international user, $0.36. That's a pretty big gap. That means the average international user is generating about 6% of the revenue of the average U.S. user.

But the company is doing a good job of narrowing that gap. International average user revenue grew 163% year over year faster than it's growing its U.S. revenue. If it could continue to narrow that gap, that's the number I'm really going to be watching for. Remember international users, the monetization, just looking at that as not great. But that represents 80% of their user base outside of the U.S. If they can continue to narrow that gap, they can afford for their user growth to stagnate a little bit if they're growing their international revenue at 163% year over year. I will be looking for that to continue a little bit in the third quarter. Pinterest reports their earnings a little later this month on Oct. 26. So right in between Johnson & Johnson and Latch you will get a Pinterest earnings report and the stock is always an active one during earnings season. That's what I'm watching with Pinterest. Any thoughts on that guys?

Trevor Jennewine: That's exactly what I'm watching, too.

Rachel Warren: It's interesting because I feel like the market has been a little hard on this stock because I think we look at this slight decline with its users in the most recent quarter, but like you said, those key numbers that you're looking for are still there.

I think it's a really interesting business and I feel like it's one that people use pretty frequently, whether it's just looking up a recipe or inspiration for the holidays. I think it has a lot of growth potential, but I think it makes sense that you would see some of this slow down a little bit because people are actually able to leave their homes again and aren't just scrolling the internet every day. I know even like in my own personal use of Pinterest, I was on it all the time when I was locked down at home and now that I'm out and about again, I still use it, but it's different.