Why Pinterest Stock Jumped 18.4% This Week

Shares of Pinterest (NYSE: PINS) jumped 22.5% this week, according to data from S&P Global Market Intelligence. The photo, activity, and shopping social media company reported second-quarter earnings, which investors took positively. As of 1:17 p.m. ET on Friday, Aug. 5, the stock is up 16.2% this week.

After the close on Aug. 1, Pinterest reported its financial results for the three months ending in June. Revenue grew 9% year over year to $666 million, while the company moved to unprofitability with a net loss of $43 million. Apparently, this was better than what investors expected, because they decided to bid up the stock by over 10% the day of the report.

However, along with the unprofitability, Pinterest had some concerning red flags in its Q2 report. Most concerning is monthly active users (MAUs), which declined 5% year over year in the quarter to 433 million. This was a broad-based decline across the globe, with North America MAUs down 8%, Europe down 4%, and the "rest of the world" segment down 3%. Pinterest has been able to counter these MAU declines with strong growth in average revenue per user (ARPU), up 17% globally in the quarter. While nice to see, a declining user count is detrimental to a social media company. ARPU growth cannot solve this problem indefinitely.

Source Fool.com