latest set of results, announced on Thursday, provided some rare excitement for investors who have been buying into the recent slew of tech IPOs.
While the share prices of Uber [UBER]
, Lyft [LYFT]
and Slack [WORK]
struggle to surpass their debut values to a meaningful level – and the companies continue to hit headlines over staff layoffs and service outages – Pinterest has been busy raking in revenues and growing its user base.
For Q2 2019, Pinterest reported a 62% year-on-year rise in revenues to $261.2m from $161.1m. The results were far ahead of the consensus estimates of $237m, while monthly active users also increased by 30% year-on-year to 300 million.
Number of monthly active users - a 30% increase year-on-year
The image sharing platform also said it was raising its full-year guidance, now expecting revenues to reach between $1.09bn and $1.11bn, rather than its previous estimate of between $1.05bn to $1.08bn.
Following the good news, its share price opened up 16% the next day, continuing to rise a further 3.2% to finish the week at $33.57. Throughout the day, Pinterest’s share price momentarily surpassed its 29 April all-time high of $34.26, hitting $35.21. Can it continue to rise?
The interest in Pinterest
Unlike other social media platforms that are coming under increased scrutiny over privacy violations and the way they handle data, Pinterest is touting itself as a platform that cares about its users’ privacy.
When announcing the results, CEO Ben Silbermann reiterated the fact that the Pinterest platform allows users to easily set their ‘boards’ to private, and opt out of targeted advertising. D.A. Davidson analyst Tom Forte said Pinterest’s attitudes around privacy could put it in prime position to absorb advertising revenue from platforms like Facebook [FB]
and Google [GOOG]
, which currently dominate the digital advertising market.
Indeed, Pinterest has been putting a lot of effort into making more money from advertising, particularly outside of its home US market. Around 80% of Pinterest’s new users are based outside of the US; however the platform has been making a mere $0.11 per monthly international user. Its US users have proved more lucrative, bringing in about $2.80 each.
This quarter’s results validated those efforts. International advertising revenues increased 199% in Q2 2019, while international users have also continued to make up the bulk of Pinterest’s new additions for the quarter, up 38% compared to a 13% rise in the US.
Amount that advertising revenues increased by in Q2 2019
But while the headline revenue results have given investors cause to celebrate, Pinterest is still some way off achieving profitability, reporting an overall loss of $1.16bn. This is likely to come down significantly in Q3 as the company put increased losses down to one-off expenses such as “meeting the performance vesting condition tied to the IPO for all historical restricted stock units”.
|Operating Margin (TTM)
|Quarterly Revenue Growth (YoY)
Pinterest share price vitals, Yahoo Finance, 6 August 2019
“A blowout quarter”
The majority of analysts, according to Refinitiv data, now have a “hold” rating on Pinterest, although there are some more bullish believers in the stock. Five recommend the stock as a “buy” or “outperform”.
“Pinterest’s blowout quarter on the top and bottom lines was especially important in light of its post-IPO stumble in its first quarterly earnings,” eMarketer analyst Andrew Lipsman said, adding that its latest performance should reassure investors of the company’s ability to scale user growth and expand its geographical reach.
“Pinterest’s blowout quarter on the top and bottom lines was especially important in light of its post-IPO stumble in its first quarterly earnings” - eMarketer analyst Andrew Lipsman
Analysts at Deutsche Bank are expecting a bright future for PINS shares. Following the results, Deutsche raised its price target from $26 to $40, representing a potential 19% upside on Friday’s closing price of $33.57.
Disclaimer Past performance is not a reliable indicator of future results.
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