Pinterest (NYSE:PINS) experienced a significant decline of over 10% on Friday after its first-quarter revenue forecast slightly missed investor expectations, signaling potential challenges for smaller social media platforms in competing for advertising dollars against larger players.
The image-sharing platform’s performance contrasts with robust advertising sales reported by Meta (NASDAQ:META) and Alphabet’s (NASDAQ:GOOGL) Google, which possess greater leverage to capitalize on the advertising rebound and increased spending by companies.
According to Danni Hewson, head of financial analysis at AJ Bell, advertisers prioritize platforms that offer the greatest return on investment, favoring industry giants like Meta and Alphabet. This leaves smaller players such as Snap and Pinterest vying for the remaining market share.
During the October-to-December quarter, other ad-dependent companies like Snap (NYSE:SNAP), New York Times (NYSE:NYT), and Fox (NASDAQ:FOXA) also experienced revenue declines due to a slowdown in advertising sales.
Pinterest faced a potential market value loss of approximately $3 billion on Friday, with its share price at $36.49. If sustained, this would mark the sharpest one-day percentage decline since April 28, 2023.
Despite its popularity among Gen Z users, comprising over 40% of its user base, Pinterest cited strong advertising spend from China and retailers, offset by weakness in the food and beverage category.
Although Pinterest achieved double-digit revenue growth, the slight miss in forecast compared to the high standards set by tech giants like Meta and Amazon led to market punishment, as noted by Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Despite the setback, Wall Street analysts largely remained positive on Pinterest’s quarterly results, with at least 19 analysts raising their price targets on the stock, boosting the median to $43.15.
Pinterest currently trades at 29.15 times its 12-month forward earnings estimates, compared to social media rival Snap’s 53.02 and Meta’s 23.06, underscoring the competitive landscape in the social media advertising market.
Featured Image: Megapixl