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pinterest Shares plunged 21% on Wednesday after lackluster third-quarter results, hit by advertising by major retailers in response to tariffs.
It was the second-worst day on record for stocks, behind only a 23.6% decline in May 2022.
The company reported adjusted earnings of 38 cents per share, compared to analysts polled by LSEG who had expected earnings of 42 cents per share. However, the platform’s revenue met analysts’ expectations of $1.05 billion.
“Tariff-related weakness will be evident for the first time in our digital advertising industry, reinforcing the lack of customer diversity and macro sensitivity for PINS bears,” RBC said in an analyst note.
Third-quarter sales in the U.S. and Canada were $786 million, below Street estimates of $799 million.
Julia Donnelly, Pinterest’s head of finance, said on an earnings call that the company faced “some ad spending restraint” in both countries during the quarter as unnamed “major U.S. retailers” had their margins squeezed by tariff-related issues.
Donnelly added that the company expects these trends to continue with President Donald Trump’s new tariffs impacting the home furnishings category.
Several banks lowered their price targets following the earnings report, citing concerns about intensifying competition from major social platforms such as Instagram and TikTok as well as macro headwinds.
city Analyst Ronald Georgie said the company’s international profitability “could plateau or decelerate sooner than expected.”
However, 81% of analysts still maintained an outperform or buy rating.
JP Morgan Despite lowering its price target as the company ramps up its efforts in artificial intelligence, the stock remains overweight.
“While we recognize that near-term macro pressures and PINS’ significant exposure to major retailers and household goods may keep the stock price range-bound in the short term, we remain positive on PINS’ user growth, deeper engagement, and overall monetization potential,” said JPMorgan’s Doug Anmuth.
The company also issued a weak outlook, expecting fourth-quarter sales to be between $1.31 billion and $1.34 billion. The midpoint of the range, $1.325 billion, was lower than Wall Street’s expectations of $1.34 billion.
“I didn’t think it was as negative as people were going through the holiday season,” CNBC’s Jim Cramer told “Squawk on the Streets” Wednesday. “They’re very quiet. (CEO) Bill Ready isn’t a guy who likes to overstate his book.”
Rosenblatt analyst Burton Crockett downgraded the stock from buy to neutral, citing concerns about how the company could compete with the rapid growth of its chatbot capabilities.
“Today, chatbots have no place in the Pinterest space,” Crockett wrote. ”google has an equivalent service called Mixboard, but this seems more like a test than a meaningful push. But we believe that as chatbots increasingly drive consumer advertising and content with commercial intent, Pinterest’s wheelhouse could absolutely be theirs. ”
bank of america Analyst Justin Post said that despite the decline in sales, the company has continued to grow steadily and is in the “early stages of realizing the benefits of AI.”
Ready said on the earnings call that the company is working on integrating more AI across its platform, including new features that curate personalized boards for users. Pinterest also rolled out an AI-powered personal shopping assistant at the end of October.
“Our investments in AI and product innovation are paying off,” Reddy said in a statement. “We have become a leader in visual search, effectively turning our platform into an AI-powered shopping assistant for 600 million consumers.”
