Just recently, Pinterest (NYSE:PINS) released the company’s second-quarter 2022 financial results. As it turns out, Pinterest’s revenue growth is slowing, and the company’s monthly active user count is down year-over-year (YOY). Furthermore, activist investor Elliott Management’s stake in PINS stock is grabbing the financial headlines, but it doesn’t mean that you have to buy the stock.
It’s often a head-turning event when an activist investor takes a position in a stock. This might attract interest in the stock and the company, prompting some folks to jump head-first with a long position.
Yet, it’s important for cautious investors to conduct their own due diligence, and not solely rely on an activist investor’s trades. After a deeper dive into Pinterest’s financials, you may come to the conclusion that this unprofitable social-media business doesn’t deserve your investable capital.
What’s Happening with PINS Stock?
So far, 2022 has undoubtedly been a disappointing and frustrating year for Pinterest’s shareholders. After starting the year at around $36, PINS stock recently slipped to just $22 and change.
Perhaps the loyal stockholders were pinning their hopes on Aug. 1, the day of Pinterest’s second-quarter earnings release. Unfortunately for them, however, the results weren’t great overall.
One highlight was Pinterest’s $666 million in quarterly revenue, which indicated 9% YOY growth. Before celebrating, though, it’s important to put this figure into a wider context. As it turns out, the 9% revenue increase represents Pinterest’s lowest rate of sales growth in the past two years.
Pinterest CEO Bill Ready declared, “I do not subscribe to a growth-at-all-costs mentality.” However, that sounds like an excuse when the company’s sales growth is slowing.
Activist Investor’s Stake Doesn’t Mean Everyone Should Buy
Also problematic is Pinterest’s Q2 2022 GAAP net earnings loss of $43 million. It’s not a great sign that the company remains unprofitable. Besides, Pinterest’s global monthly active users (MAUs) declined 5% YOY. This is significant, as MAUs are Pinterest’s lifeblood and a decrease signals trouble.
Moreover, Pinterest guided for third-quarter 2022 YOY revenue growth in the “mid-single digits,” which isn’t particularly ambitious. Overall, the fiscal picture doesn’t look bright for Pinterest.
Granted, there was recently some interest in the company after activist investor Elliott Management confirmed it was Pinterest’s biggest investor. Bear in mind, though, that activist investors buy stakes in companies for different reasons.
Their purpose may be to bring about specific changes in the company. Those changes might or might not actually take place. There are no guarantees here. Your reasons for considering PINS stock aren’t likely to be the same as Elliott’s. It’s best to just stick to the data that’s available, and to pay close attention to Pinterest’s financial results as discussed above.
The Bottom Line on Pinterest
A decline in MAUs and a GAAP-measured earnings loss are problematic for Pinterest. Decelerating revenue growth is also a red flag for the company.
Therefore, you don’t have to feel pressure to own PINS stock just because an activist investor does. It’s your decision and your money at stake, and the data will likely dissuade you from taking a strong interest in Pinterest.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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