Pinterest shares continue to fall following decline in users

Shares of Pinterest are down more than 18% Friday after the company's second-quarter earnings on Thursday revealed a decline in monthly active users.

Pinterest posted 454 million monthly active users, down more than 5% from the 478 million the company reported in April. Wall Street expected the company to increase its monthly user base to 482 million monthly active users, according to a forecast from StreetAccount.

In a letter to shareholders, the company attributed declining engagement to a "disproportionate" bump in growth as users spent more time at home during Covid-19 lockdowns.

JPMorgan downgraded Pinterest to neutral on Friday, citing worries about the monthly active user miss and a disappointing third-quarter outlook.

Wells Fargo analysts, in a note to investors Friday, expressed confidence in the company's ability to "execute their monetization strategy" but lowered their price target to $85 in response to the member decline.

"Despite MAU engagement trends coming back to reality from pandemic driven levels, we view PINS shares as attractive given continued ARPU expansion driven by advertiser demand amid easing COVID restrictions," Wells Fargo analysts wrote.

Evercore ISI downgraded Pinterest from outperform to in-line, dropping their price target to $60 from $98 in response to the user decline.

"This is likely a temporary negative inflection in PINS' lead metric, but it is a negative inflection, and the company appears to have shed many of the new users it gained during the COVID Crisis," Evercore ISI analysts said in a note to investors Friday. "There is now something of an open question as to whether PINS is experiencing maturation risk in its lead market, the U.S."

Despite monthly active user declines, Pinterest reported quarterly revenue of $613 million for the quarter, up more than 125% year over year and a net income of $69.4 million, up from a net loss of more than $100.7 million in the year-ago quarter.