The Pinterest [PINS] share price has had a mixed July. Having soared over 44% from 13 March to hit an intraday high of $81.67 on 19 July, the stock has slipped over the past week - at one point touching $68.38 on 16 July. More weakness in the stock was seen this week when Pinterest's share price dropped 2.88% to close at $74.29.
With Pinterest reporting second-quarter earnings this week, investors will be hoping for some good news. Top of their shopping lists will be how the social media platform is faring as it broadens online shopping experience in an attempt to compete with the likes of TikTok.
What could move Pinterest’s share price post-earnings?
Pinterest is targeting the shopper market to grow revenue. The social media platform said that the number of users (known as ‘pinners’) engaging with shopping results grew 200% in the 12 months ending March 2021. At the end of March, product searches had grown 20x.
Building on this demand is the launch of Idea Pins. The new feature allows users with business accounts to create high-quality multi-format content, including video creation and editing tools, to better engage with their audiences. Pinterest is doing this to appeal to younger shoppers whose choices are informed by short-form influencer videos posted on Instagram and TikTok.
This is part of a concerted effort to boost Pinterest’s merchant features. March saw it allow merchants to be able to upload, organise and promote products from multiple feeds. In June, there was the launch of the Shopping List feature. This allows users to save Product Pins in one place, negating the need to search through saved Pins and Boards when it comes time to buy.
All of these have been designed to make the selling experience easier. Not to mention drive up revenue. On a similar note, keep an eye out for any update on Pinterest’s strategic partnerships. Chief among these is a team-up with Shopify to allow merchants on the e-commerce platform to bring products onto Pinterest, turning them into shoppable Pins.
“Since Q2 2020, we have noted the strong correlation between lockdowns and engagement on Pinterest. We believe that lockdowns probably pulled forward some user growth during 2020, particularly in the US where our service has been available longer” - statement from Pinterest
One trend shareholders won’t want to see is a further deceleration in monthly active users (MAUs) growth rate, a trend that was called out in last quarter’s shareholder letter:
“Since Q2 2020, we have noted the strong correlation between lockdowns and engagement on Pinterest. We believe that lockdowns probably pulled forward some user growth during 2020, particularly in the US where our service has been available longer. Starting in mid-March, the easing of pandemic restrictions slowed US MAU growth and lowered engagement year over year as people spent less time online.”
In the first quarter global monthly active users increased 30% year-on-year to 478m However, that off the 37% growth rate seen in Q4 2020 and below analyst expectations, causing Pinterest’s share price to slip post earnings. Anything Pinterest can do to reduce churn should help the stock post-earnings.
When is Pinterest reporting?
What is Wall Street expecting?
Wall Street is expecting Pinterest to post earnings of $0.13 a share, up from a $0.07 a share loss seen in the same period last year. Revenue is pegged at $560.73m.
Pinterest is expecting second-quarter revenue to grow 105% on a year-on-year basis. One drag could be increased costs, with Pinterest saying it expected operating expenses to accelerate in the second quarter.
Pinterest's expected Q2 revenue
In the first quarter, Pinterest posted revenue of $485m, up a huge 75% from $271.9m seen in the same period last year. Earnings per share came in at $0.11, beating Wall Street estimates of $0.07 a share.
An average price target of $84.31 would represent a 13.5% upside on Tuesday’s close. Of the 30 analysts offering recommendations, Pinterest has 6 Strong Buys, 13 Buys and 10 Hold recommendations.