Pinterest Falls 15% on Unexpected Losses

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Pinterest (NYSE: PINS) was one of the more interesting companies to slated to go public early this year, boasting a successful public offering as shares of the company jumped over the first week of its launch.

While many IPOs since then have fallen in value rather than gone up, Pinterest’s solid performance was cut short today as the company reported drastic losses three times greater than what Wall Street was expecting, sending the stock plummeting.

Shares of Pinterest fell more than 15 percent in after-hours trading on Thursday after the company reported losses more than three times what was expected by most experts. The company saw a net loss of $41.4 million, or 33 cents per share, on total revenue of $201.9 million, a modest increase for a tech company in comparison to its previous year’s revenue of $131 million.

Analysts had instead expected Pinterest to lose just 11 cents per share, so the announcement was quite an unpleasant surprise for many covering the stock.

“Our total costs and expenses grew 32% year-over-year and our non-GAAP costs and expenses grew 35% year-over-year, in each case, reflecting head-count growth to improve our user experience and core technology while also increasing our sales coverage in the U.S. and internationally,” the letter read. Senior management in the company went on to emphasize the company’s revenue growth, with CFO Todd Morgenfeld saying that “We were particularly encouraged by the strength we saw in U.S. revenue and international user growth. Our strong revenue performance allowed us to expand net margin by 20 percentage points year-over-year, reflecting our continued prioritization and disciplined execution across our strategic priorities.”

The majority of Pinterest’s revenue comes from the U.S., a market that the company reports as bringing a domestic revenue per user amount of $2.25. In comparison, international revenue per user is closer to just 8 cents, making it harder for the company to grow profits through international expansion as opposed to just focusing on it’s domestic, U.S.-based market.

Many analysts have gone on to wonder how Pinterest will operate successfully in the future if international users bring in so little cash, especially since U.S. revenues can only carry the company for so long before reaching a limit.

In a conference call on Thursday evening, Chief Executive Ben Silbermann went on to mention that Pinterest had almost doubled the number of international markets it was serving ads in, growing from seven to 13 since the end of last year. However, he added that he didn’t expect any significant financial results to come from these international markets until 2020.

Overall, Pinterest still expects full-year revenues of just over $1 billion. Beside today’s drop, Pinterest’s stock has done well for itself, although it has been in a slight decline over the past couple of weeks.

Pinterest Company Profile

Pinterest is an online product and idea discovery platform that helps users gather ideas on everything from recipes to cook to destinations to travel to.

Founded in 2010, the platform consists of a largely female audience, at roughly two thirds of its 250 million monthly active users. The company generates revenue by selling digital ads and is now rolling out more in-platform e-commerce features. – Warrior Trading News

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