A month has gone by since the last earnings report for Pinterest (PINS). Shares have added about 4.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pinterest due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Pinterest Q1 Earnings Beat Estimates, Revenues Surge Y/Y
Pinterest reported strong first-quarter 2024 results, with the bottom and top lines surpassing the respective Zacks Consensus Estimate. The San Francisco-based Internet content provider reported revenue growth year over year, driven by strong user growth across all regions.
Its lower funnel solutions suite, including mobile deep linking, API for conversions and clean rooms, and Direct Links, is providing a sustained return on investments to advertisers. Growing investments in AI-integrated tools have improved relevancy and shoppability across the platform. Expanding third-party ad ecosystem to boost monetization is also supporting the top line.
Net Income
On a GAAP basis, the company reported a net loss of $24.8 million or a loss of 4 cents per share compared to a net loss of $208.6 million or 31 cents per share in the year-ago quarter. Top-line improvement and lower operating expenses led to a narrower loss during the quarter.
Non-GAAP net income was $139.5 million or 20 cents per share, up from $57.7 million or 8 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 6 cents.
Revenues
During the quarter, net sales rose to $740 million, up from $603 million in the prior-year quarter. The top line beat the Zacks Consensus Estimate of $700 million. Pinterest witnessed 12% year-over-year growth in global monthly active users (MAUs) to 518 million, an all-time record.
Healthy growth in MAUs is a compound effect of a range of initiatives focused on personalization, increasing shoppability and actionability and creating a positive alternative to other social media platforms. The company continues to invest in AI to generate highly relevant content across users’ multi-session commercial journeys.
It is witnessing solid traction among Gen Z users, which account for more than 40% of the users and is one of the fastest-growing demographics on the platform. Along with various ad formats and measurement tools, the company is bringing AI-based automation to support retailers and advertisers, driving more conversion by capitalizing on the commercial intent of the users.
The company witnessed solid adoption of its lower funnel formats and tools. Direct Link product that takes users to an advertiser’s page with a single click is gaining strong popularity among advertisers. 97% of lower funnel revenue came from Direct Links.
Along with an improvement in lower funnel solutions, the company is also seeing growing adoption of its measurement tools. Pinterest’s privacy-centric measurement tools offer advertisers conversion visibility and deliver vital insights to optimize campaign strategy for specific goals. In the first quarter, ad impressions, including both organic and paid impressions, increased by 38%.
The company is also expanding its third-party partner ecosystem. The company is partnering with Amazon Ads in the United States and Google Ads Manager in unmonetized international markets. Third-party ad formats positively contributed to revenues during the quarter.
The United States and Canada generated $592 million in revenues, up 22% year over year. Net sales beat our revenue estimate of $539.8 million. Solid momentum in retail and emerging verticals, including financial services and technology, supported the net sales.
Revenues from Europe totaled $118 million, up 27% from $93 million in the year-ago quarter. The top line missed our estimate of $124.6 million. Healthy traction in retail and CPG (Consumer Packaged Goods) ensured top-line growth in this region.
Net sales from the Rest of World rose to $30 million from $24 million recorded in the prior-year quarter, missing our revenue estimate of $34.4 million.
MAUs from the United States and Canada were 98 million, up 3% year over year. The quarterly figure surpassed our estimate of 97 million. The Rest of World registered MAUs of 279 million, up 16% from 240 million in the year-earlier quarter. It missed our estimate of 288.2 million. MAUs from Europe increased to 140 million from 128 million in the year-ago quarter and fell short of our estimate of 142.7 million.
In the March quarter, the global average revenues per user (ARPU) stood at $1.46 compared with the year-ago quarter’s figure of $1.32. ARPU in Europe improved 17% year over year to 86 cents, while the United States and Canada rose 19% to $6.05. ARPU from the Rest of World increased 8% year over year to 11 cents.
Other Details
Adjusted EBITDA was $112.9 million in first-quarter 2024, up from the prior-year quarter’s tally of $27 million. The improvement is primarily attributed to disciplined cost management and solid revenue growth.
Total costs and expenses were $794.4 million, down from $846.3 million in the year-ago quarter. On a GAAP basis, research and development expenses rose to $280.3 million from $266.3 million. Administrative costs decreased to $106.7 million from $207.9 million a year ago.
Cash Flow & Liquidity
In the first quarter of 2024, the company generated $356.1 million of cash from operating activities compared with $183.5 million in the prior-year period. As of Mar 31, 2024, Pinterest had cash and cash equivalents of $1.63 billion, with $154.3 million of operating lease liabilities.
Outlook
For the second quarter of 2024, Pinterest expects revenue in the range of $835-850 million, indicating 18-20% year-over-year growth. Non-GAAP operating expenses are projected in the range of $490-505 million, suggesting 11-15% growth year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 66.67% due to these changes.
VGM Scores
Currently, Pinterest has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Pinterest has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Pinterest belongs to the Zacks Internet – Software industry. Another stock from the same industry, Meta Platforms (META), has gained 8% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Meta Platforms reported revenues of $36.46 billion in the last reported quarter, representing a year-over-year change of +27.3%. EPS of $4.71 for the same period compares with $2.64 a year ago.
Meta Platforms is expected to post earnings of $4.67 per share for the current quarter, representing a year-over-year change of +44.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Meta Platforms. Also, the stock has a VGM Score of B.
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