Will ETFs Holding Pinterest Be Affected By The 10% Drop After Earnings?

Although a massive number of individuals are quarantined or under shelter-in-place orders to stem the spread of the coronavirus, resulting in spiking social media usage, Pinterest does not seem to be benefiting as much as its rivals from the current situation.

Shares of the image-sharing company sank more than 10% to trade near under $19 a share in extended session trading on Tuesday after the company reported disappointing user growth its first-quarter results.

Analysts surveyed by Refinitiv expected a loss of 9 cents per share and $270.1 million in revenue for the first quarter. Pinterest, however, lost 10 cents per share and had total revenue of $272 million.

Comparing Pinterest’s results versus analysts’ estimates is somewhat more complex however, given that the coronavirus pandemic has been ravaging economies around the world.

The image-sharing company’s user base expanded to 367 million monthly active users, which is a 26% spike from last year, or precisely the same annualized growth rate the company saw in Q4 of 2019.

User growth in the U.S. was up 6% compared to a year prior, which was a decline from the 8% annualized growth the company achieved in the U.S. during the fourth quarter.

But where things get interesting is how Pinterest compares to its social media competitors. In comparison to Pinterest, digital marketing rivals Facebook, Google and Snap saw improvements in user growth as individuals remain at home for the most part and are going online to alleviate boredom, occupy time, and connect with friends as a result of the coronavirus pandemic.

“Our strategic priorities for 2020 remain content, ads diversification, use case expansion, and shopping,” the Pinterest earnings release said, noting that the company’s focus has largely on content and advertising, similar to its social media rivals.

But despite efforts to expand its effectiveness, the company CEO acknowledged that the coronavirus pandemic has certainly affected the bottom line.

“The spread of Covid-19 has certainly had an impact on our business and the businesses of our advertisers, but we remain optimistic about the future,” Pinterest Chief Financial Officer Todd Morgenfeld said in written remarks.

“While we’ve been adapting to the current environment, we will continue to invest in our strategic priorities of content, ads diversification, use case expansion, and shopping,” Morgenfeld said in a statement. “We’re committed to delivering inspiration to our users and measurable results to businesses.”

Despite the decline Tuesday, RBC Capital Markets analyst Mark Mahaney sees potential for the company and has an outperform rating and price target on Pinterest stock of 27.

“We will be looking for color on whether ad revenue growth trends have stabilized, like Facebook and Alphabet,” Mahaney wrote in a note to clients.

For investors looking to use ETFs to play Pinterest, the ARK Next Generation Internet ETF (ARKW) and the SPDR S&P Internet ETF (XWEB) have larger allocations of the stock.

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