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Pinterest Q1 Earnings Disappoints Investors, Stock S Fall 19%

Pinterest Q1 Earnings Disappoints Investors, Stock S Fall 19%
The first ever earnings report delivered by the tech company Pinterest since its listing in the stock exchange in the United States delivered a blow to the tech market which had kicked off the year on bullish note. The stock price of the company had increased significantly in the last one month since it went public, but saw a drop of as much as 19 per cent following numbers well below of what analysts and investors had been expecting from it. 
There was an increase of 54 per cent in revenues for the first quarter of the current year to $201.9 million, Pinterest said, which was slightly over the consensus estimate among Wall Street analysts of $200.7 million. However the company also reported a GAAP net loss of 33 cents a share and it totaled 32 cents a share after adjustment for items such as stock-based compensation. According to FactSet, expectations of analysts was of an adjusted net loss of 11 cents a share.
But what was concerning for investors was the announcement by Pinterest of an expected full year revenues between $1.06 billion and $1.08 billion which is lower than the expectations of the market of $1.09 billion. Confidence among a section of investors dwindled after the company reported a more than expected loss for the first quarter coupled with a lower than expected forecast for full year revenue growth. That led to many offloading Pinterest shares.
According to analysts, shareholders can feel pretty upset if a after an IPO, a company misses its earnings targets and takes a cautious stand about the about the its first earnings report. There was a large drop in stocks of Lyft, another of the tech shares listed recently, after the company revealed strong first quarter revenue growth but a big net loss of $1.1 billion last week. while currently trading at 23 per cent below its offer price, the first quarter reports had resulted its shares dropping by 6.3 per cent.
Lyft and Pinterest are two tech companies whose IPOs were much awaited. It is being said that investors would now be more cautious about investing in tech companies that are planning to launch IPOs following the drop in stocks of both these companies after they reported earnings for the first quarter. One of the largest tech IPOs launched in the last several years – Uber, is trading at 4.4 per cent lower than its IPO share price.
Pinterest listed itself at the stock exchange on April 18 this year at $19 a share and stood at $24.40 a share at the close of its first day of trading. In between it rose to a high of $35.29 a share in late April. But after it reported its first quarter results, its shares dropped to as low as $24.85 a share. That value is however still 31 per cent more than its offering price but 30 per cent lower than the peak it had reached.
Analysts and experts are optimistic of the a bright long term future for Pinteerst because like most other digital platforms it also relies on ad revenue. However they also believe that the company has to make clear before investors its plans for transforming a fast revenue growth strate4gy into a profit making one.

Christopher J. Mitchell

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