Pinterest (NYSE: PINS) stock soared after it became public that activist investment firm Elliott Management has reportedly taken a 9% stake in the company. Shares were up as much as 20% in after-hours trading when the news broke after the markets closed on July 14.
The market was excited about the potential for the skilled management firm to turn things around for Pinterest, which has struggled since the economic reopening gained momentum. With that backdrop, should investors jump in and buy Pinterest stock right now? Let's consider.
Pinterest is a social media platform that is free to join and use. The company makes money by showing advertisements to users browsing its app. In that regard, user growth is crucial for its prospects. As of March 31, Pinterest boasted 433 million monthly active users, up by 2 million from the previous quarter. Before this quarter, Pinterest was on a streak of three consecutive quarters of user losses. The company is still on a four-quarter trend of user losses from its most lucrative region, North America.
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Pinterest Stock Surges After Interest From Activist Investor. Should You Buy Now?