Pinterest plunges 20% after weak results as tariffs drag on ad revenue

Pinterest experienced a significant drop in its stock price, falling by 20% on Wednesday after a disappointing report for the third quarter. The company's earnings per share came in at 38 cents, falling short of analysts' expectations of 42 cents. Despite this setback, Pinterest did achieve revenue that aligned with projections, totaling $1.05 billion. Analysts from RBC pointed out that the impact of tariffs was evident for the first time in Pinterest's advertising performance, highlighting the platform's reliance on a limited customer base and its vulnerability to macroeconomic fluctuations. Sales within the U.S. and Canada reached $786 million, which was below the anticipated $799 million. During the earnings call, Julia Donnelly, Pinterest's finance chief, indicated that the company faced "some pockets of moderating ad spend" as larger U.S. retailers grappled with margin pressures stemming from tariffs. She also warned that these challenges are likely to persist, particularly with the introduction of a new tariff affecting the home furnishings sector. Following the earnings report, several financial institutions revised their price targets downward, citing heightened competition from major social media platforms such as Instagram and TikTok, along with concerns about broader economic challenges. Citi analyst Ronald Josey expressed doubts about Pinterest's international monetization prospects, suggesting it might stagnate or decline sooner than expected. Despite the turbulent environment, 81% of analysts still rated Pinterest as outperform or buy. JPMorgan maintained an overweight rating on the stock while adjusting its price target, emphasizing the company's ongoing artificial intelligence initiatives. Analyst Doug Anmuth acknowledged the immediate pressures but remained optimistic about Pinterest's user growth and monetization capabilities. The company also projected a lackluster fourth-quarter outlook, anticipating revenue between $1.31 billion and $1.34 billion, which falls short of the Wall Street consensus of $1.34 billion. CNBC's Jim Cramer commented that the company’s outlook for the holiday season was not as dire as some analysts believed, noting CEO Bill Ready's typically reserved predictions. Rosenblatt analyst Barton Crockett downgraded Pinterest's shares from buy to neutral, expressing concerns over competition from emerging chatbot technologies that could encroach on Pinterest’s territory. Crockett noted that while chatbots currently do not significantly overlap with Pinterest's services, the potential for them to evolve into advertising platforms could pose a threat. Bank of America’s Justin Post acknowledged the revenue shortfall but pointed out the company's steady growth and its early-stage advancements in AI. Ready confirmed that Pinterest is focused on integrating more AI features, including a new tool designed to create personalized boards for users. Additionally, the company launched an AI-driven personal shopping assistant at the end of October, reinforcing its commitment to innovation in visual search and consumer engagement.