Pinterest faced a significant setback on Friday as its stock plunged over 10%, driven by a first-quarter revenue forecast that fell slightly below investor expectations. This decline signals a challenging landscape for smaller social media platforms, indicating that larger players like Meta and Alphabet’s Google might be winning the battle for ad dollars.
While Meta and Google demonstrated robust advertising sales, leveraging the ad rebound and increased corporate spending, smaller platforms like Snap and Pinterest find themselves competing for the remaining share of advertisers’ budgets. Danni Hewson, Head of Financial Analysis at AJ Bell, highlighted the fierce competition, emphasizing the preference for major players in the current advertising landscape.
Other ad-dependent companies, including Snap, New York Times, and Fox, also witnessed revenue hits in the October-to-December quarter due to a slowdown in advertising sales. Pinterest, in particular, faced an impending loss of approximately $3 billion in market value on Friday, with its stock price at $36.49.
The platform, popular among Gen Z with over 40% of its user base belonging to this demographic, reported strong advertising spend from China and retailers. However, this positive trend was offset by weakness in the food and beverage category. Pinterest’s revenue of $981.3 million in the holiday quarter and a first-quarter forecast ranging from $690 million to $705 million fell below estimates.
Despite the dip, Wall Street analysts remained optimistic about Pinterest’s quarterly results, with at least 19 analysts increasing their price targets for the stock. The median price target rose to $43.15. However, Pinterest’s stock trades at 29.15 times its 12-month forward earnings estimates, in contrast to social media competitors Snap (53.02) and Meta (23.06). The market’s response underscores the challenging environment for smaller platforms navigating the competitive advertising landscape dominated by industry giants.