Pinterest (NYSE:PINS) stock is in the green today despite the release of a short report from Grizzly Research. The research firm’s model values PINS stock between $5.28 and $16.
First, Grizzly points out that Pinterest uses monthly active users (MAUs) as a key performance indicator (KPI) in order to “deliberately conceal the decline in user engagement and value.” That differs from other related companies who report the more granular daily active users (DAUs) and impressions or clicks per user. The firm added that Pinterest’s reported active users have seen little growth since 2020.
Grizzly also stated that Western markets accounted for 95.9% of the company’s latest quarterly revenue. Through channel checks — which include Ahrefs, Semrush and SimilarWeb — it believes that U.S. users are losing interest in Pinterest while latching on to competitors.
“For U.S. users, Pinterest engagement today is down to merely 18% of its peak, depending on the platform and traffic estimator. The picture is similar for European and Canadian users,” said Grizzly.
PINS Stock: Grizzly Research Releases Short Report
To offset slowing user activity in the West, Pinterest has focused on “strategically growing into mostly low-income countries to window-dress traffic statistics.” However, the company doesn’t report growth by country, which Grizzly believes is a move to hide its decline in the West.
In addition, Grizzly believes that advertisement revenue in low-income countries will not be able to make up for a slowdown in the West. That’s inherent in the name, as people with low-income will have less money to spend.
“For example, the U.S. advertising market has a volume of $369B—India surpassed the U.S. in organic traffic to Pinterest post-COVID, but only has a $14B advertising market,” said Grizzly.
Pinterest’s users have also issued complaints about the number of ads on the site, according to the firm. Analysis published by RBC Capital Markets showed that the site’s ad load has “increased by up to 30% per year.”
Grizzly ultimately believes that Pinterest is in a death spiral. The scenario can be characterized as Western users departing the site, resulting in the company selling cheaper ads in order to lift up revenue, which is then leading to a lower-quality user experience and users leaving Pinterest.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
