What happened

Pinterest (NYSE: PINS) was pinned down today, down sharply after a downgrade from Guggenheim, which cited data showing Pinterest’s user base continued to shrink.

As of 2:41 p.m. ET, the headline was down 10%.

So what

Referring to Pinterest’s Ad Manager and Apptopia searches, which track app downloads, analyst Michael Morris downgraded his rating on social media action to Buy to neutral and lowered his target priced from $ 46 to $ 39. Morris estimated that the total number of Pinterest users increased from 226.9 million in November to 218.1 million in December 2021. This number is different from the monthly number of active users (MAU) used by Pinterest, which is greater than 400 million. Given the continued decline in users, Morris is more bearish about the company’s growth prospects and believes it could lose its edge in social commerce over its social media peers.

Also today, Wolfe Research launched a cover on Pinterest with a neutral rating and a price target of $ 45. Analyst Deepak Mathivanan said reasonably priced growth would be an important focal point for internet stocks in the first half of the year. On this account, Pinterest looks like a solid choice, trading at a price-to-earnings ratio of under 35 after today’s slide.

Now what

Pinterest slipped to a new 52-week low today, and the stock is now down almost 60% from its all-time high last February. Shares of the discovery-based image search engine plunged on two consecutive earnings reports after the company reported a decline in its user base.

Morris’s findings indicate that users continued to decline in the fourth quarter, although the company said in its earnings call that its user base was stable through October. Pinterest is losing users following a spike during the pandemic, so the decline is likely short-term.

With a P / E of 31, Pinterest is trading at a valuation similar to the S&P 500. Considering the company’s growth prospects and its rapidly improving profitability, this seems to be a mistake.