Pinterest Faces ‘Existential Risk’ Amid Unsettling Q3 Shakeup

Shares of Pinterest (PINS) experienced a significant drop following its third-quarter earnings report, which fell short of Wall Street’s expectations. On Wednesday afternoon, the stock plummeted over 22% around 2:37 p.m. EDT.

Pinterest’s Third-Quarter Performance

Pinterest’s Q3 report revealed a revenue increase of 17% year-over-year, totaling $1.05 billion. Adjusted earnings were reported at 38 cents per share, reflecting a 19% rise compared to the previous year. However, this fell below the expected 42 cents, leading to disappointment among analysts.

Impact of Advertising and Economic Factors

Julia Donnelly, Pinterest’s CFO, stated that advertising revenue had been affected by reductions in ad spending, particularly in the U.S. and Canada. This slowdown is attributed to larger U.S. retailers facing margin pressures, partly due to tariffs imposed under the Trump administration.

• Global monthly active users increased 12% year-over-year to 600 million.
• Projected revenue growth for Q4 is estimated between 14% and 16%, anticipating a total revenue of $1.313 billion to $1.338 billion.

Analysts’ Concerns and Outlook

Despite some growth, analysts expressed skepticism about Pinterest’s future. Brian White from Monness Crespi described the Q3 performance as “uninspiring,” while Mark Mahaney from Evercore ISI highlighted a slowing growth rate and labeled the Q4 forecasts as “less optimistic.”

RBC Capital analyst Brad Erickson suggested that the impact of tariffs on digital ad revenue may reveal vulnerabilities in Pinterest’s customer diversity and make it more sensitive to economic fluctuations.

AI and Existential Risks

Concerns also arose regarding the potential threat posed by advancements in artificial intelligence. Barton Crockett from Rosenblatt Securities raised alarms about how the growing capabilities of chatbots could become an “existential risk” for the company. This sentiment echoed sentiments from other analysts.

Moreover, Pinterest recently introduced Pinterest Assistant, an AI-driven visual tool aimed at enhancing the online shopping experience for users. Despite these innovations, skepticism remains regarding Pinterest’s ability to compete in the evolving landscape dominated by generative AI technologies.

Stock Outlook and Analyst Consensus

Following the Q3 results, analysts have adjusted their price targets for Pinterest. Nevertheless, the overall consensus remains a “Strong Buy,” based on 22 Buy ratings and five Hold ratings monitored over the last three months.

• Average price target stands at $39.73, indicating a potential upside of over 55% from current trading levels.

As Pinterest faces challenges both from within and externally, the journey ahead will be crucial in determining its future in a rapidly evolving market landscape.