Pinterest (PINS -0.64%) has struggled to stabilize after a volatile couple of years. Revenue and user growth surged at the pandemic's onset as folks spent more time at home. Then, as economic reopening gained momentum, the tailwind turned into a headwind.
Pinterest had shed monthly active users (MAUs) for three consecutive quarters before stopping the bleeding in its most recent quarter. Despite the win, Pinterest has other challenges to grapple with in the near term.
Image source: Getty Images.
Pinterest has more work to do to assuage investors
As of its first quarter of 2022 ended on March 31, Pinterest boasted 433 million monthly active users. That was up two million from the previous quarter. The turnaround was a relief for Pinterest after monthly active users had fallen by 24 million, 10 million, and 13 million in Q2, Q3, and Q4 of 2021, respectively. Like other social media sites, Pinterest is free to join and use. The company makes money by showing advertisements, and marketers are willing to pay more if you have more users.
Looking at the details of Pinterest's user trends reveals that a challenge yet exists. The company's streak of user losses has continued for four consecutive quarters in its most-lucrative U.S. & Canada geographic segment. User totals have fallen from 109 million to 94 million in that region. To understand how valuable these customers are to Pinterest, consider its average revenue per user.
In the U.S. and Canada, its average revenue per user was $4.98 in its first quarter ended in March. Compare that to the average revenue per user for its users in Europe of $0.72 in the same quarter. To make the case even more dramatic, consider its average revenue per user from folks in the rest of the world of $0.08. The figures highlight that Pinterest's troubles are not yet over.
And it faces other challenges too
Pinterest noted a few other headwinds impacting the company in the near term in its first-quarter shareholder letter:
Time spent on competitive video-centric consumer platforms remains a headwind, particularly in our more mature markets. These declines were most pronounced for our desktop web and mobile web users. The decline in global MAUs from February 1, 2022, to March 31, 2022, was primarily due to Russia's recent invasion of Ukraine and was particularly pronounced in Europe.
I mentioned earlier that Pinterest was free to join and use, but it's not the only free entertainment choice consumers have. Rival social media apps YouTube and Tiktok along with ad-supported TV all compete for a share of people's attention. Marketers are agnostic as to who wins and allocate their budgets according to how many folks they can influence to buy their products and how often.
That said, marketers are wary of uncertainty, and that is precisely what is happening with the Russian invasion of Ukraine. The conflict has businesses concerned about the fallout beyond the Russian and Ukrainian borders. Consumers in neighboring regions could tighten their budgets, change travel patterns, and remain in that state of mind if the occupation persists.
With that kind of consumer backdrop, marketers reduce their budgets until there is more clarity on the outcome.
PINS Price to Free Cash Flow data by YCharts.
These forces have worked together to pull Pinterest's stock down, trading at a price-to-free-cash-flow and price-to-sales near its lowest ever. It's clear that Pinterest's troubles are not over yet.
