Pinterest, Inc. (PINS) shares plunged 6.87% in pre-market trading on Monday, following a downgrade by Raymond James and growing concerns over potential impacts on the company's advertising revenue. The social media platform, known for its visual discovery engine, faces challenges from softening consumer sentiment and potential regulatory changes affecting its international advertisers.

Raymond James downgraded Pinterest to market perform from outperform, citing weakening consumer sentiment as a key factor. The analysts noted that weakness in consumer packaged goods in March contributed to a 2% to 3% budget forecast reduction for the second quarter. Recent surveys indicate consumers are pulling back spending on home, beauty, and alcohol categories, which could negatively impact Pinterest's earnings as the platform relies heavily on digital advertising and third-party sales in these sectors.

Adding to the pressure, Deutsche Bank analyst Ben Black highlighted potential risks from the closing of the de minimis tariff loophole, which is set to impact digital platforms relying on ad spending by China-based companies. The loophole, allowing duty-free trading on goods under a certain price, has been a boon for Chinese e-commerce companies like Temu and Shein. Its closure on May 2nd could lead to a significant reduction in digital ad spend from these merchants, potentially affecting Pinterest's revenue stream. Black estimates a possible $4.9 billion decline in overall digital ad spend if Chinese merchants cut their advertising budgets by 70% in response to the new tariff regulations.