Pinterest (PINS 0.89%) reported first-quarter fiscal 2022 earnings after the markets closed on Wednesday, April 27. Shareholders can breathe a sigh of relief as the social media site finally ended a streak of three consecutive quarters of monthly active user (MAU) losses.
Pinterest attracted tens of millions of new users at the pandemic's onset, as folks stuck at home looked to the image-based social media site for inspiration on at-home activities. As economic reopening gained momentum in 2021, Pinterest started shedding millions of users each quarter.
Image source: Getty Images.
Pinterest stops the bleeding
The reversal was not huge. Pinterest added two million monthly active users in the first quarter, which ended March 31, from the previous quarter. It now boasts a total of 433 million MAU. That is still far below its peak of 478 million in the first quarter last year. However, shareholders can be relieved after the company lost users for three straight quarters.
Additionally, Pinterest breaks down its user total into three geographic segments, U.S. and Canada, Europe, and the rest of the world. The distinction is vital because users from the U.S. and Canada are most sought after by marketers. Pinterest's app is free to join and use. It makes money by showing advertisements, so marketer demand is crucial to the business.
PINS Revenue (Quarterly) data by YCharts.
In that regard, the average revenue per user (ARPU) was $4.98 for the U.S. and Canada, up by 31% from the same quarter the prior year. ARPU in Europe was $0.72, up by 40% from last year. Finally, ARPU in the rest of the world was $0.08, up by 164% from last year. The figures highlight the importance of attracting users from higher-value markets.
Unfortunately, Pinterest's growth comes from the lower-value rest of the world. In the most recent quarter, it lost one million users from U.S. and Canada and two million from Europe. Meanwhile, it added five million from the rest of the world. So while MAU losses stopped overall, it has continued for four straight quarters for its most valuable U.S. and Canada segment. In contrast, it is encouraging that Pinterest is increasing users in the rest of the world with 164% ARPU growth.
What this could mean for Pinterest investors
The stock was up 9% on the day following the earnings announcement. The end of overall user losses removes a significant risk. When the streak continued, investors were uncertain how far the losses would go. With the streak over, there is hope that the worst of reopening headwinds are behind it. Further, Pinterest's stock was already down huge off its high. Even with the recent increase, Pinterest is trading at an attractive valuation.
PINS Price to Free Cash Flow data by YCharts.
Still, it's not all smooth sailing ahead. Pinterest faces headwinds resulting from supply chain shortages that are constraining marketer demand. Fortunately, that's a short-term issue that will likely resolve itself as the world progresses in the battle against COVID-19.
