Pinterest (PINS  ) shares plunged following its Q2 report despite beating estimates on the top and bottom-line. Shares were lower as the company reported a decline in monthly active users in the U.S. and a slower rate of growth than expected for global monthly active users.

Even after this decline, PINS remains a high-multiple stock with a price to sales ratio of 20. This means that certain growth expectations are embedded into the stock price, so it's concerning if growth is slowing. It's also a contrast to other social media platform which showed continued momentum following the surge in growth during the pandemic.

Inside the Numbers

In Q2, Pinterest reported earnings per share of $0.25 which topped expectations of a $0.13 per share profit. This equates to a $69 million profit for the quarter which is a significant improvement from its $100 million loss a year ago. Revenue also beat expectations at $613 million vs. $562.1 million and was 125% higher than last year's Q2.

However, shares mostly reacted to the big miss in monthly active users which dropped from 478 million last quarter to 454 million. Analysts were looking for an increase of 482 million users. In total, US users declined by 7%, while global users increased by 5%. Like many social media companies, Pinterest benefited from higher online ad rates as average revenue per user came in at $1.32, topping forecasts of $1.17 per user.

Pinterest's quarter with weak user growth but better than expected revenue per user is similar to Twitter (TWTR  ) and Facebook (FB  ), however, Pinterest is priced for more growth, and it had a bigger miss than its peers. The most logical explanation is some loss in users as the world returned to normal. Basically, the trajectory remains higher, but we are simply correcting for the overshoot due to the pandemic leading to a short-term surge in growth.

The company chose not to issue firm guidance for Q3 given the uncertainties of the coronavirus but said it expects revenue growth in the low 40s which is in line with analysts' expectations of 43% growth in Q3.

Stock Price Outlook

Pinterest has been one of the best-performing stocks since the pandemic. Throughout its tenure as a public company, every drop of greater than 20% has turned out to be a great buying opportunity in hindsight.

This could turn out to be another great entry point, especially if the slowdown in user growth is more of a pandemic-related issue rather than a change in its trajectory. However, if the company's user growth has really peaked or going to grow at a mid-single-digit price, then it's likely that the stock could move lower as it would have difficulty to grow into its valuation.