The bullish tech IPO market of early 2019 faced another setback Thursday as Pinterest, which has seen its stock price soar following its listing a month ago, delivered its first-ever earnings report. The numbers were largely below what investors were hoping for, causing the stock to fall as much as 19% in after-hours trading.
Pinterest said revenue in the first quarter rose 54% to $201.9 million, or slightly above the $200.7 million consensus estimate among Wall Street analysts. But the company also posted a GAAP net loss of 33 cents a share. Adjusted for items such as stock-based compensation, Pinterest’s net loss totaled 32 cents a share. Analysts had been expecting an adjusted net loss of 11 cents a share, according to FactSet.
Perhaps more concerning to investors, Pinterest said its revenue for the full year would come in between $1.06 billion and $1.08 billion, below the $1.09 billion analysts had been forecasting. Coupled with the larger-than-expected loss of the first quarter, the prospect of 2019 revenue growth also falling below expectations led some investors to unload Pinterest shares.
Missing on earnings targets and offering cautious guidance in the first earnings report following an IPO can leave shareholders feeling especially uneasy. Last week, Lyft’s stock tumbled after it reported strong revenue growth but a surprisingly large $1.1 billion net loss. Lyft’s stock is down 6.3% since reporting its first-quarter earnings and is trading 23% below its $72 a share offering price.
Lyft and Pinterest are among the highest-profile tech companies that have gone public this spring. That both saw their stocks fall in the wake of their first earnings may leave investors more cautious about other tech companies planning to go public. Uber, the biggest tech IPO in several years, is trading 4.4% below its $45 a share offering price.
Pinterest went public at $19 a share on April 18, closing its first day of trading at $24.40 a share before rising as high as $35.29 a share in late April. Following its earnings Thursday, the stock fell as low as $24.85 a share–still 31% above its offering price but also 30% below its peak price as a public company.
Like many digital platforms that rely on ad revenue, Pinterest has a promising long-term future, but needs to show its investors it has a plan to turn its rapid growth into steady profits. Zoom, a video-conferencing startup that went public on the same day Pinterest did, went public after net profits in two of its last three quarters. Zoom’s stock is trading 132% above its $36 a share offering price.
As both Zoom and Pinterest rallied in their first few weeks of trading, analysts pointed to a “bull market” for tech IPOs. But the disappointing inaugural earnings from Lyft and now Pinterest may put that bullish mood on hold. Investors may be hungry for tech IPOs, but as Pinterest is finding out, that appetite can be far more fragile and fleeting that it at first seems.
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