Image-based social media company Pinterest (PINS -4.92%) reported fiscal 2021 third-quarter earnings after the market closed on Nov. 4. The announcement revealed a troubling trend that continues to move in the wrong direction for Pinterest. 

The company lost monthly active users (MAU) in the domestic market for a second consecutive quarter. Pinterest experienced a surge of new users and engagement at the pandemic onset when folks spent a lot more time at home. Now that economies are reopening, people are less often downloading and engaging with the Pinterest app.

A group of young individuals on their mobile devices.

Image source: Getty Images.

User losses have a significant impact on Pinterest

Pinterest is free to sign up with and to use. The company makes revenue by showing advertisements to users browsing its app and engaging with the platform. The more people spend more time on its app, the more opportunities it has to display advertisements. For that reason, it is a troubling sign that users are leaving the platform. 

In all, Pinterest lost 10 million monthly active users in Q3 from the second quarter, including 2 million lucrative users from the U.S. That's on top of the 24 million monthly active users that left Pinterest in Q2 from Q1. That means over the last two quarters, a combined 34 million users have left Pinterest. Still, even after those losses, the company boasts 444 million users.

To try to quantify the impact those losses could have on Pinterest, consider its average revenue per user (ARPU). For users from the U.S., the ARPU was $5.55 in Q3. Meanwhile, for users from its international segment, ARPU was $0.38 in Q3. That gives a deeper understanding of why users from the U.S. are more valuable to Pinterest -- advertisers are willing to pay more to gain their attention, much more. 

In the previous two quarters, Pinterest has lost 9 million MAU from the U.S. At an ARPU of $5.55, that's an adverse impact to revenue of $49.95 million per quarter, or almost $200 million annualized. At the same time, Pinterest lost 24 million MAU from its international segment. At an ARPU of $0.38, that's a negative hit to revenue of $9.1 million per quarter, more than $36 million annualized. This is for a company that made $1.69 billion in revenue in fiscal 2020. 

Pinterest has stopped the bleeding 

Pinterest stock was up 1.5% in the hours following the announcement. The market could be pleased with the slowing pace of MAU losses. The 10 million losses in Q3 were much smaller than the 24 million drop in Q2. There was further encouragement when management gave an update on fourth-quarter trends as of Nov. 2. Pinterest noted that it had reversed the trend, and it now has 447 million MAU, a 3 million increase from the end of Q3.

That can go a long way in reducing investor anxiety about decreases in the future. Still, the gain is just a slight rebound for a stock that is down almost 34% year to date in 2021. Plenty of volatility remains as the world makes progress in a gut-wrenching tussle with COVID-19.

The sell-off in Pinterest stock has it trading at a forward price-to-earnings ratio of 41, the lowest in a couple of years. Investors willing to stomach the risk in the short term may want to consider adding Pinterest to their portfolios.