Pinterest drops as Morgan Stanley downgrades on 'too much uncertainty'
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Pinterest (NYSE:PINS) shares fell on Tuesday after Morgan Stanley downgraded the stock and cut the price target, noting the e-commerce focused social network has "too much uncertainty" from too many headwinds.
Analyst Brian Nowak lowered his rating to equal weight from overweight and slashed his price target to $30 from $53, pointing out that both user and time spent trends are lower than they had been previously, with time spent at 2017 levels. In addition, Pinterest is shifting users towards lower monetizing creator videos, Nowak said.
"We have been wrong about PINS' ability to continue to rapidly innovate and improve its user offerings (to drive retention, growth and engagement) and ad offerings (to capitalize on its social shopping opportunity)," Nowak wrote, adding that it has led to "slower than expected ad growth" and a decline of 12 million U.S. monthly active users since the first quarter of 2021.
Pinterest (PINS) shares fell nearly 2% to $25.99 in premarket trading on Tuesday.
In addition, U.S. users have spent anywhere between 1% and 19% less time year-over-year over the past four quarters, with total minutes falling to 2017 levels, something Nowak categorized as "troubling given the importance of engagement to driving monetization."
Similar to Meta Platforms' (FB) Facebook, Pinterest is transitioning its users towards creator videos, akin to Facebook's Reels, Nowak pointed out. 
While the potential for higher monetization is possible over time, it's likely that the pace for better monetization will be "relatively slow" throughout the industry due to high competition, low ad loads and continued testing and learning, the analyst added.
It's also possible that Meta and other advertisers, such as Alphabet (GOOG) "will be advantaged in their ability to monetize this format over smaller players like Pinterest," Nowak stated.
Earlier this month, Pinterest (PINS) rolled out several new shopping features, including Checkout, at its annual advertiser summit.