Pinterest shares slump as growth warning rattles investors

REUTERS: Shares of Pinterest Inc fell about 20per cent before the opening bell on Friday and were set to start trading at more than a three-month low, after the company warned of slowing user growth in the United States, its largest market.

At least eight brokerages cut their price target on the stock, which fell to US$57.60 in pre-market trading. If the losses hold, about US$9 billion would be swiped off its market capitalization which currently stands at about US$36.8 billion.

J.P.Morgan made the most aggressive cut and slashed its target by US$27 to US$68, pushing it well below the current median price target of US$77, citing lower-than-expected user additions in the latest reported quarter and disappointing third-quarter outlook.

The brokerage also cut its rating on the stock to "neutral" from "overweight".

Overall monthly active users (MAUs), a widely watched metric, rose by only 9per cent and missed analysts' expectations in the second quarter. It had risen 30per cent in the prior quarter.

The company also said that user growth in the United States was decelerating as people who used the platform for crafts and DIY projects during the height of the pandemic step out more as curbs ease.

"This performance suggests lockdown benefits were more transitory than anticipated, while an apparent growing pivot towards the 'creator economy' does raise concern regarding structural engagement trends," James Cordwell, analyst at Atlantic Equities said in a post-earnings note.

Of 30 analysts covering Pinterest, 19 rate the stock "buy" or higher, 10 "hold" and one recommends "sell".

Pinterest shares, which were the biggest losers among NYSE-listed stocks pre-market, have fallen about 9per cent so far this year compared with a 18per cent rise in the broader S&P 500 index.

(Reporting by Eva Mathews in Bengaluru; Editing by Bernard Orr)