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Pinterest’s Q2 Results: What Should Investors Watch?

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Pinterest’s Q2 results are scheduled to be released on Thursday. What should investors expect in the report? First, Pinterest (PINS) went public in April. The company went public when the second quarter was already underway.

Pinterest’s Q2 results

Pinterest hasn’t provided internal estimates for its second-quarter results. So far, the only performance estimate Pinterest provided is for its fiscal results. For fiscal 2019, Pinterest expects to report revenues of $1.06 billion–$1.08 billion. The company expects a fiscal loss before interest, tax, depreciation, and amortization of up to $70 million.

However, analysts expect revenues of $235.5 million from Pinterest in the second quarter. For the bottom line, analysts expect Pinterest to post an adjusted loss per share of $0.08.

Pinterest’s recent quarter

Pinterest’s last quarterly report was for the first quarter. Pinterest’s first-quarter report was for the period before the company went public. For the first quarter, Pinterest delivered revenues of $201.9 million, which represented 54% growth YoY (year-over-year). The company’s first-quarter revenues beat the consensus estimate of $200 million.

Pinterest’s 54% YoY revenue growth in the first quarter made it the fastest-growing major US social media company. The revenues grew 39% YoY at Snapchat’s parent Snap (SNAP) in the first quarter. Facebook (FB) and Twitter (TWTR) recorded revenue growth of 26% and 18% YoY, respectively, in the first quarter. For the second quarter, Snap, Facebook, and Twitter have reported revenue growth of 48%, 28%, and 18% YoY, respectively.

Turning to the bottom line, Pinterest had an adjusted loss of $40.4 million in the first quarter. The adjusted loss translated to an adjusted loss per share of $0.32, which is better than the adjusted loss per share of $0.38 the previous year. However, Pinterest’s adjusted loss per share in the first quarter was way wider than analysts’ estimate of $0.11.

What should investors watch?

Pinterest’s audience metrics will draw a lot of investor attention when the company releases its second-quarter results. Advertising is Pinterest’s primary revenue source. As Facebook and Twitter’s results showed, a platform’s audience size determines how much advertising dollars in can attract.

Facebook boasts over 6.0 billion monthly active users and 2.1 billion daily users across its family of social apps. The company generated $14.9 billion of advertising revenues in the first quarter and $16.6 billion of advertising revenues in the second quarter. Twitter had 330 million monthly active users. Recently, the company reported having 139 million daily users. Twitter generated $679 million of advertising revenues in the first quarter and $727 million in the second quarter.

Google (GOOGL), which also boasts a massive audience, generated $32.6 billion of advertising revenues in the second quarter. Yelp (YELP), with a smaller audience than Facebook and Google, generated $227 million of advertising revenues in the first quarter. Yelp plans to report its second-quarter results on August 8.

Pinterest finished the first quarter with 291 million monthly active users—up from 265 million in the previous quarter. Investors will be looking to see if Pinterest continues to add new users and how quickly that’s happening.

To stay competitive in the digital advertising marketplace, Pinterest keeps growing its audience. The advertising market presents a huge revenue opportunity if Pinterest is competitive. To illustrate the massive revenue opportunity, we looked at data from eMarketer. The data show that the global digital advertising market was worth $283 billion in 2018. By 2023, the global digital advertising market will be worth more than $517.5 billion. Currently, Google and Facebook have a tight grip on the global digital advertising market.

Pinterest goes public and raises $1.4 billion

Pinterest went public on April 18 to give the public an opportunity to own a piece of the business. The company priced its shares at $19 per share for the IPO, which is well above the $15–$17 planned price range. The IPO allowed Pinterest to raise $1.4 billion in cash. The company’s cash reserve was $161 million at the end of the second quarter—before the IPO. Therefore, the IPO cash helped Pinterest expand its war chest.

Third-party access 

In June, Pinterest announced that it expanded the third-party access to its platform. The company launched the “Pinterest Partners” program. The program would give businesses greater access to the company’s platform for marketing purposes. Also, Pinterest said the program would improve users’ shopping experience. Pinterest is one of the digital platforms that people consult when searching for items to purchase. Making Pinterest a great place to do shopping searches could help attract more advertisers to the platform. The advertising business is Pinterest’s main revenue source.

Pinterest app for Windows rolls out globally

In May, Pinterest rolled out the version of its app for Windows devices globally. The company went a step further to draw more users. Pinterest already had apps for Apple’s iOS and Android, so it made sense for the company to cater to Windows users. Notably, Pinterest launched the Windows app shortly after Snap released a revamped version of its Snapchat app for Android devices.

Pinterest’s Q2 results will likely influence investors’ perception of the stock. As of Tuesday, Pinterest shares have risen 17% since the IPO.

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