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Pinterest Earnings: Revenue, Guidance Lag Estimates

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Pinterest (PINS) stock fell 20% in extended trading on October 31 after the image-sharing company reported weak third-quarter earnings results. It missed its revenue estimates in the third quarter. Further, it provided a disappointing revenue outlook, which broke investors’ confidence.

Pinterest stock closed with a fall of 3.01% on October 31, ending the day at $25.14. At this closing price, Pinterest’s market cap is about $13.6 billion. The stock is trading 31.7% below its 52-week high of $36.83 and about 9.1% above its 52-week low of $23.05. It’s gained only 3% since it went public on April 18, 2019. Further, it’s up 32.3% from its IPO price of $19.

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Pinterest’s third-quarter earnings results

Pinterest reported a generally accepted accounting principles loss of $125 million, or $0.23 per share, in the third quarter. On an adjusted basis, Pinterest delivered earnings of $5.9 million, or EPS of -$0.01, in the third quarter. However, Wall Street analysts were expecting the company to post EPS of -$0.04. Its numbers also improved from the previous year’s quarter, when it reported losses of $14.9 million. Higher top line growth and a rise in monthly active users led to earnings growth for the company in the third quarter.

Pinterest reported adjusted EBITDA of $3.87 million in the quarter. In the previous year’s period, it posted adjusted EBITDA losses of $13.4 million.

The company’s revenue of $279.7 million rose 47% YoY (year-over-year) in the quarter driven by user additions and advertising revenue. However, its revenue lagged analysts’ estimate of $280.6 million owing to higher user additions in international markets. Pinterest’s average revenue per user came in at $0.90, lower than the consensus estimate of $0.91.

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Pinterest’s monthly users in the third quarter

Overall, the company added 22 million pinners, or MAUs (monthly active user) in the third quarter. Of its 22 million MAUs, only 2 million additions came from the US market. The remaining 20 million user additions were in international markets. At the end of the third quarter, Pinterest’s MAUs totaled $322 million, higher than analysts’ expectation of $311.8 million.

The company saw double-digit user growth internationally. In the third quarter, its international MAUs rose 38% YoY, while its US MAUs rose only 8% YoY. However, the overseas market isn’t as lucrative for Pinterest. The company generates less revenue there than in US markets, according to Bloomberg. Reportedly, domestic users made the company $2.93 per user in the current period, while international users brought in only $0.13 per user.

Revised guidance

Pinterest has raised the lower end of its revenue guidance for the full year. It now expects its revenue to rise to $1.100 billion–$1.115 billion in 2019. Earlier, the company had a full-year revenue guidance range of $1.095 billion–$1.115 billion. However, analysts anticipate 2019 revenue of $1.119 billion. They expect its 2020 revenue to rise 35.2% YoY to $1.5 billion.

Pinterest also expects narrower adjusted EBITDA losses in 2019 compared to its earlier forecast. The company expects adjusted EBITDA in the range of -$30 million to -$10 million in 2019. Earlier, the company had forecast adjusted EBITDA in the range of -$50 million to -$25 million. Wall Street analysts expect adjusted EBITDA of -$32 million from it in 2019. However, they expect adjusted EBITDA of $38.1 million from it 2020.

Analysts expect Pinterest to see EPS of -$0.15 in 2019 and EPS of $0.02 in 2020.

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Peer comparison

In comparison, Snapchat parent Snap (SNAP) posted upbeat third-quarter earnings results but gave lower revenue guidance for the fourth quarter. Snap’s global daily users came at 210 million in the third quarter. Social media giant Facebook (FB), which reported its third-quarter earnings on October 31, also delivered impressive results. Facebook’s number of daily users grew to 1.62 billion, while it reached total monthly users of 2.45 million in the quarter. In contrast, Twitter’s (TWTR) monetizable daily active users reached 145 million in the third quarter after it delivered disappointing earnings results and guidance.

Analysts’ recommendations

Of the 21 analysts tracking Pinterest, eight have rated the stock as a “buy,” up from seven last month. Around 12 have rated it as a “hold,” unchanged from last month. Only one analyst has recommended a “sell” on the stock, also unchanged from last month. Analysts have an average target price of $33.30 on Pinterest. This target price implies a premium of 32.5% based on its closing price of $25.14 on October 31.

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