Pinterest’s Q3 Performance Sparks Concern Despite Solid Earnings
Even though Pinterest PINS exceeded expectations for its third-quarter earnings, a cautious revenue forecast caused the stock to tumble over 15% last Friday. Unlike other social media platforms like Meta Platforms META and Snap SNAP, which experienced gains post-earnings, investors are questioning if the reaction to Pinterest’s stock was overly harsh.
Examining Pinterest’s Q3 Results
In its Q3 earnings released last Thursday, Pinterest reported an earnings per share (EPS) of $0.40, surpassing the Zacks Consensus estimate of $0.34 and rising 43% from $0.28 a year earlier. Revenue reached $898.37 million, slightly above the expected $897.07 million and up 17% from the $763.2 million reported in the same quarter last year.
Over the last four quarters, Pinterest has consistently outperformed earnings expectations, achieving an average EPS surprise of 17%. The company also beat revenue estimates in three of those quarters, with an average sales surprise of 1.45%.
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Looking Ahead: Pinterest’s Guidance
Despite its positive financial performance, Pinterest’s revenue guidance for Q4, estimated to be between $1.12 billion and $1.45 billion, fell short of analyst expectations, with the current consensus predicting $1.15 billion—a growth of 17% from the previous year.
Looking ahead, sales for fiscal 2024 are projected to increase by 19%, with further growth expected in FY25, reaching $4.25 billion, which translates to a 17% rise. Earnings are anticipated to surge 32% this year, followed by another 20% growth in FY25 to reach $1.73 per share.
The increased expenditure on developing artificial intelligence tools as well as decreased demand in its Food and Beverage segment, which includes meal planning and culinary trends, contributed to the lower revenue guidance.
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Pinterest Stock Performance Analysis
Currently, Pinterest stock has decreased by 17% this year, although there was a slight recovery in trading today. In comparison, Snap has fallen by over 20% this year, while Pinterest’s performance continues to lag behind broader market indexes and Meta’s remarkable gain of 64%.
Since going public in April 2019, Pinterest’s stock has risen by 24%, while Snap’s increase has been a mere 4%. Yet, both companies still fall significantly short of the S&P 500 and Nasdaq indexes, both of which have achieved over a 100% increase, and Meta’s stock which has surged more than 200% during the same period.
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Pinterest’s Financial Standing
With shares trading around $30, Pinterest appears more attractively priced following its recent drop, showing a valuation of 20.3 times its forward earnings. This is significantly lower than Snap’s valuation of 50 times and only slightly below the industry average of 24.4 times and Meta’s 26.1 times.
As Pinterest invests in AI, its financial health remains solid, boasting $2.44 billion in cash and equivalents by the end of Q3 2024. This strong position is bolstered by total assets of $3.49 billion, substantially exceeding total liabilities of $597 million.
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Final Thoughts
Currently, Pinterest holds a Zacks Rank of #3 (Hold). While its Q4 revenue forecast may not meet expectations, the stock could still benefit long-term investors. Furthermore, Pinterest’s investment in AI may lead to increased operational efficiency, with some analysts predicting a higher return on ad spend (ROAS).
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
