What happened
Shares of Pinterest (PINS -0.52%) were down 3.7% as of 12:38 p.m. ET on Tuesday following concerns about a possible recession on the horizon.
Bank executives at Bank of America and JPMorgan Chase warned of a recession coming next year, and that could have negative consequences for Pinterest and other social media stocks that rely on advertising to monetize users.
So what
Rumors were floating on Wall Street Monday afternoon that Pinterest was cutting its recruiting team and slowing hiring, which fed into the talks of recession.
However, even with a deteriorating macroeconomic backdrop, Pinterest announced a solid earnings report in October, with revenue up 8% year over year, which was stable with the second quarter.
Still, worsening business conditions could further slow advertising spending, which wouldn't be good for social media stocks that rely on ads to monetize users. CEO Bill Ready, who joined the company in June, is looking to improve personalization to increase the time that users spend on the Pinterest app, which he credited for the improved user growth last quarter.
Now what
On the one hand, the rumors that Pinterest is cutting back on hiring could signal that business conditions are getting worse. But it could also mean that Pinterest is moving forward with plans to improve efficiency and boost profitability. Management noted on the third-quarter earnings call that it intended to "return to meaningful margin expansion next year."
Overall, there are a lot of signals that market traders are processing right now, but Pinterest is in good hands with former PayPal executive Ready. If Ready can duplicate the success he had at PayPal in helping the payments provider grow user engagement, the stock should be a good long-term investment.
