The share price of Pinterest last Thursday, February 8, showed a drop against the background of the publication by this company of a revenue report for the fourth quarter of 2023, which turned out to be disappointing relative to the preliminary expectations of experts on the relevant occasion, and of a forecast containing weak estimates of the prospects for the growth of the brand’s business shortly.
It is worth noting that the securities of the mentioned social web service recovered slightly after the negative dynamic against the background of news about the new partnership of this firm with Google, but the negative attitude of investors is not canceled by this moderate improvement in the indicator in any way.
Pinterest’s revenue for the last three months of 2023 was fixed at $981 million. At the same time, LSEG analysts expected that this figure would be equal to $991 million. The company’s revenue for the specified period increased 12% year-on-year. For the fourth quarter of 2022, the corresponding figure was $877.2 million. However, the positive dynamic in this case did not become an obstacle to the pessimism reflected in the value of Pinterest shares. The fact that the result improved year-on-year could not contain the negative reaction of the market to the fact that the brand’s financial performance indicator did not meet forecasts.
The social web service’s monthly number of active users grew to 498 million in the fourth quarter of 2023. On an annual basis, this indicator showed an increase of 11%. In this case, the result was better than analysts’ forecasts, who expected the active user base to expand to 487 million people.
Pinterest also reported that its global average revenue per user was $2 last quarter. Analysts predicted that the corresponding figure would be $2.05.
Pinterest expects revenue of between $690 million and $705 million in the first quarter of the current year. In this case, the indicator is expected to grow by 15-17% year-on-year. The middle of the company’s revenue forecast range is $697.5 million. Analysts expected the corresponding figure to be equal to $703 million.
Initially, the share price of the social web service showed a drop of 28% to an after-hours low of $29.40. After the announcement by Pinterest CEO Bill Ready about the integration of third-party apps with Google, the company’s securities rose to $37.82. In this case, the drop in the indicator is almost 10%.
Integration with Google is similar in terms of the interaction concept to Pinterest’s partnership with Amazon, which is focused on third-party advertising. The corresponding statement was made by Bill Ready. For Pinterest, collaboration with Amazon is an opportunity to increase its total sales and simplify the process of purchasing products presented in the app for users.
Bill Ready started working at Pinterest in 2022. Before that, he headed the Google commerce and payments business. According to Mr. Ready, Pinterest’s collaboration with the mentioned tech giant will help better monetize markets outside the United States. In his opinion, social web service is under-monetized in all directions, but this problem is most sensitive at the global level. Bill Ready stated that only 20% of sales are in markets outside the United States.
The head of Pinterest said that integration with Google started a couple of weeks ago, without specifying a specific date. He noted that this process already has a result, which is an increase in demand for third-party advertising. According to him, the relevant business line did not generate significant revenue in the fourth quarter of 2023, but it can help the company in the first three months of the current year and the future.
It is worth noting that the trend of digital advertising market recovery is currently being recorded. The corresponding dynamic is reflected in the performance reports of Meta, Alphabet, and Amazon. These business giants increased their ad units by double digits in the fourth quarter of 2023. Companies are increasing their online promotion costs after a reduction in 2022 and a partial continuation of this trend in 2023 against the backdrop of a tense geopolitical situation and the economic reality in the form of high-interest rates.
At the same time, not all companies engaged in advertising on digital platforms record an improvement in performance indicators. For example, Snap’s share price fell 35% this week after the company reported a 5% increase for the fourth quarter of 2023, which is below expectations. This brand has also issued weak guidance.
Bill Ready says that the digital advertising market is recording an improvement in the situation compared to the state of affairs that was recorded last year. He also noted that retail is the fastest-growing segment of his company.
Mr. Ready said that the advertising industry’s performance matters more than ever. According to him, Pinterest is the beneficiary of this trend. He stated that his company provides performance with a level of efficiency that has not been seen before.
Last quarter, Pinterest reported that some advertisers had stopped spending amid the crisis in the Middle East. Julia Donnelly, the company’s chief financial officer, said that the situation in the mentioned region eventually became a temporary impact factor.
Before the publication of the performance report, Pinterest’s share price showed an increase of 9.5%. Over the past year, the company’s securities have risen in price by 53%.
Pinterest’s costs for the fourth quarter of 2023 decreased by about 10% year-on-year, amounting to $785 million. This trend is largely due to a decrease in spending on sales and marketing. Also last year, Pinterest cut about 5% of its workforce. This decision has become part of an industry-wide trend.
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