Pinterest profit is soaring, but the stock price is sinking anyway. What’s happening with PINS?

Investors clearly had their hopes pinned on a better forecast for Pinterest when the company announced its Q3 2024 results and Q4 forecast yesterday.

After yesterday’s closing bell, the social media image-collecting company revealed its third-quarter financials, and in premarket trading this morning, Pinterest shares (Nasdaq: PINS) are tumbling. As of the time of this writing, PINS shares are down 13% to $29.52 per share.

Why are PINS shares sinking so much before the bell? To be clear, there were some good results from the company’s Q3, including: 

• Q3 revenue was up 18% year over year to $898 million.
• The platform’s global monthly active users (MAU’s) grew 11% year over year to 537 million.
• Net income grew a staggering 354% year over year to $30.56 million.

As CNBC notes, Pinterest beat on revenue expectations—garnering $2 million more than the consensus of $896 million. It also beat on earnings per share. Pinterest has a Q3 adjusted EPS of 40 cents when only 34 cents was expected.

Announcing the company’s latest quarterly financials, Pinterest CEO Bill Ready said, “Our AI investments are driving results by powering better personalized experiences and greater performance for advertisers, with our lower-funnel ad tools being the fastest-growing part of our business.”

Now for the bad news

The primary reason that PINS shares have taken a beating in premarket seems to be that investors are unhappy with the Q4 forecast Pinterest announced yesterday.

When issuing its Q4 guidance for the all-important holiday quarter, Pinterest said it expects revenue to be between $1.125 billion and  $1.145 billion. That would be year-over-year growth of between 15-17%.

The problem with this forecast is that its midpoint is $1.135 billion, which as CNBC notes, is below the $1.143 billion midpoint that most analysts were expecting. Investors also likely were not thrilled with Pinterest CFO Julia Donnelly’s admission during yesterday’s earnings call that weakness from food and beverage advertisers has negatively impacted Pinterest’s overall sales. 

Like most social media networks, Pinterest makes most of its revenue from advertising. Food and beverage advertisers are some of the biggest ad spenders in the world, and if they are cutting back, it doesn’t bode well for Pinterest’s coffers.

Pinterest’s expenses also soared

Despite 18% revenue growth in Q3, Pinterest also saw its expenses soar. The company revealed that its total costs and expenses for the quarter were $904 million, up 17% from the same quarter a year earlier.

The company attributed this increased expense to research and development investments and hiring more staff knowledgeable in artificial intelligence. 

But while it’s good that Pinterest is beefing up its AI expertise, the increased costs ate into Pinterest’s profits for the quarter.

Looking beyond this quarter, as of closing bell yesterday PINS stock is down 8.4% year-to-date and well below its 2024 highs of above $44 per share in June this year.