Monthly losses of active users continue on Pinterest in Q3
Image based social media business Pinterest (NYSE: PIN) released its results for the third quarter of fiscal 2021 after the market closed on November 4. The announcement revealed a troubling trend that continues to go in the wrong direction for Pinterest.
The company lost monthly active users (MAUs) in the domestic market for a second consecutive quarter. Pinterest saw a surge of new users and engagement early in the pandemic, as people spent significantly more time at home. Now that savings are reopening, people are downloading and interacting with the Pinterest app less often.
User losses have a significant impact on Pinterest
Pinterest is free to sign up and use. The company generates revenue by showing advertisements to users who browse its app and interact with the platform. The more time people spend on its app, the more opportunities it has to display ads. For this reason, it is a disturbing sign that users are leaving the platform.
In total, Pinterest lost 10 million monthly active users in the third quarter compared to the second quarter, including 2 million lucrative users in the United States. This is in addition to the 24 million monthly active users who left Pinterest in Q2 from Q1. This means that in the past two quarters, 34 million combined users have left Pinterest. Yet even after these losses, the company has 444 million users.
To try and quantify the impact these losses could have on Pinterest, consider its Average Revenue Per User (ARPU). For US users, the ARPU was $ 5.55 in the third quarter. Meanwhile, for users in its international segment, the ARPU was $ 0.38 in the third quarter. This helps to better understand why US users are more valuable to Pinterest: Advertisers are willing to pay more for their attention, much more.
In the previous two quarters, Pinterest lost 9 million MAU in the United States. With an ARPU of $ 5.55, this represents a negative impact on revenue of $ 49.95 million per quarter, or nearly $ 200 million annualized. At the same time, Pinterest lost 24 million MAU from its international segment. With an ARPU of $ 0.38, this represents a negative revenue impact of $ 9.1 million per quarter, or over $ 36 million annualized. It is a company that achieved sales of $ 1.69 billion in fiscal 2020.
Pinterest stopped the bleeding
Pinterest stock rose 1.5% within hours of the announcement. The market might be happy with the slowing pace of MAU losses. The $ 10 million loss in the third quarter was well below the $ 24 million drop in the second quarter. There was added encouragement when management took stock of the fourth quarter trends on November 2. Pinterest noted that it had turned the tide and now has 447 million MAU, an increase of 3 million from the end of the third quarter.
This can go a long way in reducing investor anxiety about future declines. Still, the gain is only a slight rebound for a stock that has lost nearly 34% since the start of the year in 2021. There remains a lot of volatility as the world moves forward in a heart-wrenching struggle with COVID-19 .
The sale of Pinterest stock brings it to a forward price-to-earnings ratio of 41, the lowest in a few years. Investors willing to take the risk in the short term may want to consider adding Pinterest to their portfolios.
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