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Pinterest Faces Challenges in Growing Ad Revenue

Pinterest's stock faces a downturn as analysts voice concerns over its ability to grow ad revenue. Despite being a popular platform, its financial future raises questions.

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Image creadit: mteerapat (Chiangmai, THAILAND - June 06, 2021:woman Hand holding smartphone mobile with Pinterest app on the screen. Pinterest is an online pinboard that allows people to pin their interesting things.)

Pinterest’s stock has recently experienced a decline, influenced by a downgrade from Jefferies due to concerns over the company’s advertising revenue growth. Jefferies lowered its rating for Pinterest from “buy” to “hold” and reduced the price target from $40 to $32, citing challenges in the platform’s ability to transition advertisers from experimental spending to consistent “always-on” ad campaigns.

Analysts have expressed skepticism about the immediate impact of Pinterest’s new AI-driven advertising tools, such as Performance+, suggesting that it may be premature to expect these innovations to deliver the mid-teens revenue growth anticipated by Wall Street in the first quarter. Jefferies projects a 10% growth, which is below the consensus estimate of 13% from Visible Alpha.

Despite these concerns, Pinterest’s CEO, Bill Ready, has highlighted the company’s investments in AI and lower-funnel ad tools, noting that features like direct links are among the fastest-growing segments. In the third quarter, Pinterest reported an 18% increase in revenue to $898.4 million, slightly surpassing estimates, though this growth did not fully meet analysts’ expectations.

The stock market has responded to these developments, with Pinterest’s shares falling more than 1% in recent trading and declining approximately 18% over the past 12 months.
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