What happened

Pinterest (PINS -1.15%) was getting pinned to the mat today, down sharply after a downgrade from Guggenheim, which cited data showing Pinterest's user base continuing to shrink.

As of 2:41 p.m. ET, the stock was down 10%.

A person looking at Pinterest.

Image source: Pinterest.

So what

Referencing research from Pinterest's Ad Manager and Apptopia, which tracks app downloads, analyst Michael Morris lowered his rating on the social media stock from buy to neutral and lowered his price target from $46 to $39. Morris estimated that Pinterest's aggregate users fell from 226.9 million in November to 218.1 million in December 2021. That number is different from the monthly active users (MAUs) figure Pinterest uses, which is over 400 million. Given the ongoing user decline, Morris is more bearish on the company's growth prospects, and believes that it could lose its edge in social commerce to its social media peers.

Also today, Wolfe Research initiated coverage on Pinterest with a neutral rating and a price target of $45. Analyst Deepak Mathivanan said that growth at a reasonable price would be an important focal point for internet stocks in the first half of the year. On that account, Pinterest looks like a solid pick, trading at a price-to-earnings ratio of less than 35 after today's slide.

Now what

Pinterest slipped to a new 52-week low today and the stock is now down nearly 60% from its all-time high last February. Shares of the discovery-based image search engine have plunged on two consecutive earnings reports after the company reported declines in its user base. 

Morris' findings indicate that users continued to fall in the fourth quarter, though the company had said in its earnings call that its user base was flat through October. Pinterest is losing users following a spike during the pandemic so the decline is likely short-term.

At a P/E of 31, Pinterest is trading at a similar valuation to the S&P 500. Considering the company's growth prospects and rapidly improving profitability, that seems like a mistake.