Pinterest shares are poised to open Tuesday at levels not seen since 2018, following a significant drop in the previous session. The stock closed at $15.42 on Monday, down 16.8%, as concerns mount over slowing ad revenue and the company’s ability to navigate a rapidly evolving advertising landscape.
The downturn comes as investors continue to assess the impact of artificial intelligence on the tech sector, with a particular focus on companies reliant on advertising revenue. Economist Mohit Kumar at Jefferies noted that although “AI adoption is an overall positive rather than a negative, but it would change the business models of some industries,” Reuters reported. Pinterest’s challenges are compounded by broader economic factors impacting retailer spending.
Ad revenue remains the central issue for Pinterest. The company recently issued a first-quarter revenue forecast of $951 million to $971 million, falling short of the $980.1 million analysts had predicted. Chief Financial Officer Julia Donnelly attributed the weaker outlook to reduced advertising spending from major retailers, citing concerns over tariffs. “Many of the largest retailers have been disproportionately impacted by tariffs and have been pulling back on advertising spend across the industry,” according to Reuters.
Pinterest is attempting to address these challenges through cost-cutting measures and a strategic pivot towards artificial intelligence. In January, the company announced plans to reduce its workforce by up to 15% and incur restructuring costs of $35 million to $45 million, redirecting resources to AI-focused roles, and initiatives. Although, some analysts remain skeptical. Jeremy Goldman of eMarketer questioned the effectiveness of these cuts, stating, “Without clear cost savings or a concrete path to AI-driven revenue growth, these cuts look more defensive than strategic,” as reported by Reuters.
In a separate development, Pinterest announced on February 16th the appointment of Kecia Steelman, CEO of Ulta Beauty, to its board of directors. CEO Bill Ready described Steelman as “a seasoned executive with deep experience leading large-scale businesses,” while Steelman expressed her enthusiasm for joining the board “at a pivotal time for the company,” according to a LinkedIn post.
The AI Challenge: Competition and Execution
A key question facing Pinterest is its ability to maintain ad growth in the face of increasing competition from larger tech companies that are rapidly integrating AI into their advertising platforms. These competitors offer bundled solutions encompassing targeting, creative tools, and checkout functionalities – features that Pinterest currently struggles to replicate. The company must demonstrate a clear path to leveraging AI to deliver tangible value to advertisers.
The impact of tariffs on major retailers remains a significant risk factor. Continued pressure on retailer margins could lead to further reductions in marketing budgets, directly impacting Pinterest’s ad revenue. Successfully executing its AI strategy is therefore critical, as failure to deliver demonstrable results could leave the stock undervalued.
Retailer Earnings and Economic Indicators on the Horizon
Investors are closely monitoring upcoming earnings reports from major retailers for insights into consumer spending trends. Walmart is scheduled to release its results and hold a conference call on February 19, according to Business Wire, while Home Depot will follow on February 24, as reported by Home Depot. These reports are expected to provide valuable clues about the health of consumer demand and the potential impact on advertising budgets.
the core PCE price index, a key inflation measure closely watched by the Federal Reserve, is set to be released on Friday, February 20. The Bureau of Economic Analysis (BEA) reports that this data could influence expectations regarding future interest rate cuts, particularly for high-beta internet and advertising stocks.
What comes next for Pinterest hinges on its ability to demonstrate a clear and effective AI strategy, navigate the challenges posed by tariffs, and adapt to the evolving advertising landscape. The coming weeks and months will be crucial in determining whether the company can regain investor confidence and reverse its recent decline.
What are your thoughts on Pinterest’s restructuring and AI push? Share your insights in the comments below.
