Pinterest Reports Soft Earnings. The Stock Is Tumbling.

Pinterest stock is up 16% this year, about the same as the S&P 500. (Gabby Jones/Bloomberg)

Pinterest reported weak third-quarter earnings on Tuesday afternoon. Its shares were falling sharply in after-hours trading.

Adjusted earnings-per-share for the quarter came in at 38 cents, behind Wall Street’s consensus estimate of 42 cents. Revenue for the quarter reached $1.05, in-line with expectations, and up 17% on the year.

Pinterest shares were down 18% in the wake of the report.

The report was not all bad but also had little to excite investors. Monthly users exceeded expectations and hit a milestone at 600 million, but average revenue per user was less than expected at $1.78. Much of Pinterest’s user growth is international, where users spend less than in the U.S.

Fourth-quarter revenue guidance also disappointed, while the company’s outlook for adjusted Ebitda, or earnings before interest taxes depreciation and amortization, was in line with expectations.

Coming into the holiday season, U.S. tariffs impacted revenue growth in North America, the company said. “Some of our largest retailers in U-Can pulled back spend across the industry,” CEO Bill Ready said on an earnings call with investors. “Not specific to us, but pullback across the industry as they navigated tariff-related margin pressure. And we think that’s disproportionately impacting large retailers.”

Pinterest can be a starting point for shopping, and recent growth has begun to capitalize more on that. “Over the past few years, we’ve transformed Pinterest from a platform of window shopping, where users often found that all the stores were closed, into an AI powered visual- first shopping assistant,” Ready said on the call.

“We are digitally replicating the joyful experiences of walking the bazaar or working with a great salesperson at your favorite boutique, while seamlessly enabling our users to take action in an evolving, competitive environment.”

Pinterest’s sales have often exceeded quarterly expectations, but that hasn’t guaranteed that the stock rallies the next day. In the past 21 quarters, revenue fell short of projections only twice, but the stock fell on nine occasions.

Swings in the stock are also outsized. After those 21 quarters, the average move, up or down, has been 14%, ranging from a gain of 36% to a loss of 18%. Investors should expect volatility after the report.

Pinterest’s valuation reflects that the stock is a bit ignored by investors. The stock trades at 16.6 times the earnings per share expected for the next 12 months, compared with 23.1 times for the S&P 500 index.

Pinterest’s P/E ratio is roughly equal to the percentage growth in earnings expected for the coming year, which makes the shares relatively inexpensive. Earnings growth for the S&P 500 is expected to be 14%, well below the index’s P/E ratio.

The analysts who cover Pinterest see that upside potential. The average rating on the stock is Buy, and the average price target is $43.40, implying a 29% rise over Monday’s closing price of $33.70. Of the 34 analysts who have written recent notes on Pinterest, only one has a Sell rating.

Pinterest stock is up 16% this year, about the same as the S&P 500.

Write to Adam Levine at adam.levine@barrons.com