What happened
Pinterest (PINS -1.55%) got hit with some analyst downgrades today that weighed on the stock. A UBS analyst lowered the stock's near-term price target to $32 from $42, while maintaining a neutral rating on the shares. Likewise, OTR Global downgraded Pinterest to mixed from positive.
The shares were trading down 6.7% as of 2:26 p.m. ET on Tuesday. Meanwhile, the broader market was down only 0.6%, as stocks staged an afternoon rally.
Image source: Getty Images.
So what
Pinterest will have something to prove when it reports fourth-quarter earnings on Thursday, Feb. 3, after the market close. After the stock dropped 67% from its all-time high in 2021, investors will be looking for strong engagement metrics.
The third quarter wasn't bad on the surface. Revenue grew 43% year over year, with adjusted margin in EBITDA (earnings before interest, taxes, depreciation, and amortization) improving to 32% from 21% over the third quarter in 2020. But monthly active users were up only 1%, which wasn't enough to motivate investors to buy a stock trading at a high price-to-sales (P/S) ratio entering the quarter.
PINS PS ratio. Data by YCharts.
Now what
Pinterest is rolling out new video content in the app (Idea Pins), which it believes will make the platform more shoppable and drive engagement and monetization higher.
Monetizing users was a bright spot last quarter, with average revenue per user (ARPU) up 37% year over year. More growth in ARPU and healthy margin performance could turn the stock around in 2022.
