Pinterest's Annual Sales Forecast Falls Short; Shares Tumble

(Bloomberg) -- Pinterest Inc. gave an annual sales forecast that fell short of estimates, shaking the confidence of investors who had pushed the company’s stock up more than 60% in its first month of public trading.

The digital scrap-booking company said 2019 revenue will be $1.06 billion to $1.08 billion, compared with the average analyst’s projection of $1.09 billion, according to data compiled by Bloomberg. It also projected a loss before interest, taxes, depreciation and amortization of $45 million to $70 million for the year, while some analysts projected Pinterest would be profitable on that basis. Shares fell 16% in extended trading.

Pinterest, which averages 291 million monthly users, makes money from advertising and markets itself as a way for brands and retailers to reach consumers at the inspiration phase of the shopping process. Chief Executive Officer Ben Silbermann reiterated a message on Thursday that Pinterest has been preaching for years: That while the online pin-board competes for ad dollars with Facebook Inc. and Twitter Inc., and even reports similar financial and user metrics, Pinterest is not a traditional social-media company.

“People come to Pinterest to focus on themselves, their interests and their lives, not to keep up with other people or to socialize," he said on a conference call following the report. In an interview, Silbermann stressed that this message is meant to set expectations for users who may not otherwise know what Pinterest is. "If you haven’t used the product and you go in there expecting to have a new way to communicate with friends, you’re going to be pretty disappointed," he said.

Explaining that difference will be one of the company’s long-term challenges. Following the stock’s high-flying IPO, Thursday’s post-earnings tumble reflects a realization among some investors that Pinterest also has a short-term challenge -- its business is still in the early stages of maturity.

First-quarter sales rose 54% to $201.9 million, better than analysts’ average estimate of $200.8 million. The net loss for the period narrowed to $41.4 million, or 33 cents a share, Pinterest said Thursday in a statement. The loss excluding some items was 32 cents a share, wider than analysts’ projected loss of 10 cents a share. In the year-earlier quarter, Pinterest had a net loss of $52.7 million, or 42 cents, on sales of $131.4 million.

Morningstar analyst Ali Mogharabi said the company’s annual revenue guidance was a concern, though Pinterest still has a lot of business opportunities that haven’t been realized, especially around advertisers pushing consumer packaged goods. "Even with the guidance miss, [we] expect strong revenue growth going forward," he said via email.

Several analysts on Pinterest’s call asked about the company’s international advertising business, which made up just 7% of Pinterest’s quarterly revenue despite people overseas making up about 71% of Pinterest’s monthly users. Finance chief Todd Morgenfeld said that while Pinterest is investing heavily to build out its international sales force, he "wouldn’t expect material financial results to accrue to the company’s benefit until 2020."

Pinterest had been a bright spot in the tech industry’s rocky IPO season, in which highly anticipated public offerings from ride-hailing startups Uber Technologies Inc. and Lyft Inc. have disappointed. Pinterest’s stock jumped 28% in its first day of public trading on April 18, and closed at $30.86 on Thursday, 62% higher than its IPO price. It dropped as low as $24.74 following the report.

It’s not uncommon for newly public companies to have tumultuous stock market debuts, and Silbermann said Thursday’s stock decline isn’t a concern. "Since we’re new, there’s going to be that acclimation period," he said. "There’s a natural kind of evening-up of expectations that I think probably happens."

To contact the reporter on this story: Kurt Wagner in San Francisco at kwagner71@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack

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