Pinterest stock drops to $18.28 amid growth concerns

Pinterest shares slid to $18.28, their lowest level since May 21 and roughly 30% below where the stock began the year. The decline follows several months of selling as investors weighed slowing user gains in the United States and rising competition from larger social platforms.

Pinterest reported second-quarter revenue of $1.18 billion, an 18% increase from a year earlier. Monthly active users rose 11% to 640 million. The United States and Canada generated $880 million of revenue, up 18% year over year; Europe revenue increased 12% and the Rest of World segment rose 38%. U.S. and Canada monthly active users grew by 4%.

Analysts project continued but slower top-line growth. Third-quarter revenue is forecast at about $1.21 billion, a 14.8% year-over-year increase, and full-year revenue estimates center near $4.91 billion, up about 16.3% from the prior year. Profit expansion is expected in part from recent headcount reductions and investments in artificial intelligence intended to improve ad monetization.

The stock’s valuation has narrowed with the price decline. The forward price-to-earnings ratio is near 9.91, below the sector median of about 13.3 and well under the company’s five-year average near 25. Pinterest has repurchased about $2 billion of shares and executed a capped call that raises the effective dilution breakpoint on outstanding convertible notes to $30.59. An activist investor has taken a stake in the company.

On technical charts, the stock dropped from a recent high of $25.60 on Aug. 4 and formed a rounded-top pattern. The Average Directional Index reached roughly 22.4, its highest reading since mid-July. The stock fell below its 50-day moving average and moved past an Ultimate Support level on Murrey Math Lines. Some market technicians project further downside to the mid-teens, while some investors point to the lower multiple as a potential buying opportunity.

Pinterest faces the task of maintaining user engagement against larger rivals and translating that engagement into steady ad revenue growth. The company delivered revenue and user gains in the latest quarter, while market sentiment has become more cautious and analysts have adjusted near-term expectations.