Pinterest (PINS -4.03%) is scheduled to report first-quarter 2022 earnings after the markets close on Wednesday, April 26. The image-based social media app is struggling to find its footing as the economy reopens.
The company thrived at the pandemic's onset when the world was spending most of its time indoors. As progress against COVID-19 spreads globally, people are spending less time at home. The trend has caused Pinterest to lose monthly active users (MAUs) for three consecutive quarters, and the stock has collapsed in response.
Pinterest is hoping user losses are in the past
Pinterest's MAUs peaked in the first quarter of 2021. At that point, it boasted 478 million MAUs. Since then, it shed users in the second, third, and fourth quarters of 2021, ending the year with 431 million MAUs.
Like other social media apps, Pinterest is free to join and use. Its only source of revenue is through businesses paying to advertise to its users. Marketers are following consumers who are increasingly spending more time online. For that reason, Pinterest's loss of MAUs could limit the amount of revenue it can generate through ad sales.
That can partly explain why the stock price is taking such heavy losses even though Pinterest has delivered relatively solid revenue and profit growth figures in the last several quarters.
To make matters worse for Pinterest, rival Snap (SNAP -2.29%) has continued adding millions of daily active users while Pinterest's numbers decline. Snap reported its Q1 results after the markets closed on April 21 and revealed it added another 13 million daily active users quarter over quarter. That's going to increase the pressure on Pinterest to stem its user losses when it reports Q1 results on April 26.
Of course, even though Snap and Pinterest are social media companies, they are affected somewhat differently by the economy's reopening. Pinterest benefited more from stay-at-home orders because users log on more often for inspiration on activities they do at home, such as cooking and decorating. Nevertheless, the market tends to group them together, and Pinterest's underperformance is noticeable vis-a-vis Snap.
What this could mean for Pinterest investors
Analysts on Wall Street expect Pinterest to report revenue of $572.79 million and earnings per share (EPS) of $0.03. If the company meets those projections, it will represent an increase of 18% and a decrease of 72.73%, respectively, from the same period the year before.
Management had told investors to look for Pinterest to report revenue growth in the high teens in Q1. Wall Street estimates are in line with what senior officials at Pinterest projected. That said, the metric that will have the greatest impact on the stock price following the earnings announcement is likely the MAU trends. If Pinterest reports growth in MAUs and forecasts for more growth ahead, that is likely to boost the share price in the days following the report.