What happened
Shares of Pinterest (PINS 4.04%) were falling today after better-than-expected results in its second-quarter earnings report weren't enough to offset Q3 guidance that missed the mark. A broad sell-off in tech stocks following Fitch's downgrade of the U.S. credit rating may have also played a role.
As of 12:22 p.m. ET, the stock was down 4.8%, while the Nasdaq had fallen 2.5%.
Image source: Pinterest.
So what
Pinterest posted another round of modest top-line growth, with revenue up 6% to $708 million, which topped analysts' expectations for $696 million.
Its user base also continued to recover after a post-pandemic slide, with monthly active users (MAUs) up 8% to 465 million. Users grew in all three of its geographies, up 3% in North America to 95 million, 6% in Europe to 124 million, and 10% in the Rest of World to 246 million.
North American users remain the most valuable on the platform, with an average revenue per user (ARPU) of $5.92, compared to less than $1.00 in the other two regions.
On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 16% to $107 million, and adjusted earnings per share jumped from $0.11 to $0.21, easily exceeding analysts' expectations for EPS of $0.12.
CEO Bill Ready, who joined the company last year, said, "Over the past year, we've been laser-focused on our key differentiators and we're seeing results. Users are coming back more often and engaging more deeply, Pinterest is increasingly shoppable and actionable, and we're delivering better and more measurable performance for our advertisers."
Now what
For the third quarter, management anticipates revenue growth in the high-single digits and low-single-digit growth in operating expenses, meaning it expects margin expansion. That was a little lighter than the 10.6% revenue uptick Wall Street was looking for, which seems to explain the sell-off.
Still, some analysts responded favorably to the report, with one upgrade and several price target hikes. Shares had rebounded over the last three months after a sell-off following its first-quarter earnings report, and the stock may look expensive considering it's only growing by single digits.
But there seems little reason to sell the stock based on the second-quarter update.
