Should You Buy or Sell Pinterest Stock Right Now?

Pinterest (NYSE:PINS) released its fourth-quarter earnings after the markets closed on Thursday. The quarter ended on December 31, 2019. Notably, the stock rose around 17% in after-hours trading on the same day. Pinterest beat analysts’ revenue and earnings estimates in the fourth quarter. The company provided an upbeat revenue outlook for fiscal 2020, which boosted investors’ confidence. For fiscal 2020, Pinterest expects its revenue to be around $1.52 billion. Analysts expect 2020 revenues of $1.5 billion—up 32.5% YoY.

Pinterest stock closed with a rise of 5.02% on Thursday and ended the day at $23.01. At the closing price, the company’s market capitalization is $12.8 billion. The stock is trading 37.5% below its 52-week high of $36.83 and about 32.3% above its 52-week low of $17.39. The stock went public on April 18, 2019. So far, the stock has risen 21.1% from its IPO price of $19.

Pinterest’s fourth-quarter earnings results

In the fourth quarter of 2019, Pinterest reported revenue of $399.9 million—46.4% growth from $273.2 million in the fourth quarter of 2018. The company beat Wall Street analysts’ consensus revenue expectation of $371.2 million.

Pinterest reported a generally accepted accounting principles net loss of $35.72 million or $0.06 per share in the fourth quarter. On an adjusted basis, the company delivered earnings of $76.87 million or an EPS of $0.12 in the fourth quarter. However, Wall Street analysts expected the company to post an adjusted EPS of $0.08.

Pinterest reported an adjusted EBITDA of $77.31 million for the fourth quarter. In the fourth quarter of 2018, the company posted an adjusted EBITDA of $51.68 million.

According to a CNBC report, “CEO Ben Silbermann said the company continued to improve the foundation of the Pinterest app in the fourth quarter by strengthening recommendations and the shopping experience, as well as speeding up the performance of the platform. In 2020, Pinterest intends to focus on delivering relevant content, ads and shopping experiences.”

User base

Overall, the company added 13 million pinners or MAUs (monthly active users) in the fourth quarter. Among the 13 million MAUs, only 1 million additions came from the US market. The remaining 12 million user additions were in international markets. At the end of the fourth quarter, Pinterest’s MAUs totaled $335 million—higher than analysts’ expectation of $331.3 million.

Pinterest saw double-digit user growth internationally. In the fourth quarter, the company’s international MAUs increased by 35% YoY (year-over-year), while its US MAUs only rose by 8% YoY. However, the company generates less revenue in international markets than in US markets. Pinterest’s global average revenue per user was $1.22—higher than the consensus estimate of $1.14. The company highlighted that domestic users made it $4.00 per user in the current period, while international users only brought in $0.21 per user.

Peer comparison

In the fourth quarter, Snap (NYSE:SNAP) reported revenue of $561 million—44% growth from $390 million in the fourth quarter of 2018. Snap missed analysts’ consensus estimate of $563 million. The company’s adjusted EPS of $0.03 was above analysts’ estimates of $0.01 per share in the fourth quarter. However, the company reported an adjusted EPS of -$0.04 in the fourth quarter of 2018. Snap reported global DAUs (daily active users) of 218 million in the fourth quarter. To learn more, read How Snap Stock Looks as It Enters a Downturn.

In the fourth quarter, Facebook (NASDAQ:FB) reported revenue of $21.1 billion—24.6% growth from $16.9 billion in the fourth quarter of 2018. The company beat Wall Street analysts’ consensus estimate of $20.89 billion. Facebook’s adjusted EPS of $2.56 was above analysts’ estimates of $2.53 per share in the fourth quarter. However, the company reported an adjusted EPS of $2.38 in the fourth quarter of 2018. Facebook’s DAUs reached 1.66 billion on average for December 2019—up 9% YoY. The company reached MAUs of 2.50 billion as of December 31, 2019—up 8% YoY. To learn more, read 3 Takeaways from Facebook’s Q4 Earnings Report.

Analysts’ recommendations for Pinterest

Among the 24 analysts tracking Pinterest, 12 recommend a “buy”—up from nine the previous month. About 12 analysts recommend a “hold”—unchanged from the last month. None of the analysts recommend a “sell” on the stock. Analysts have an average target price of $28.86 on Pinterest. The target price implies a premium of 25.4% based on the closing price of $23.01 on Thursday.

Today, Bank of America analyst Justin Post increased its target price on Pinterest stock to $32 from $29. According to TheFly, “The analyst notes that the quarter saw improved conversion optimization and better advertising campaigns, along with international user and ARPU growth.” The report also said, “Post still keeps his Neutral rating on Pinterest shares however, noting that the company has a tough comp coming up in Q2.”

Many analysts revised their target price for Pinterest stock after its fourth-quarter earnings results.

  • Pivotal Research increased its target price from $25 to $27.
  • RBC increased its target price from $32 to $35.
  • Baird increased its target price from $30 to $32.
  • Zephirin Group increased its target price from $14 to $34.
  • Susquehanna increased its target price from $22 to $30.
  • Rosenblatt Securities increased its target price from $23 to $26.

Now let’s look at analysts’ recommendations for Pinterest’s peers.

  • Among the 42 analysts providing recommendations on Snap stock, 21 recommend a “buy,” 20 recommend a “hold,” and one recommends a “sell.” As of Thursday, Snap was trading at a discount of 17.8% from its target price of $20.03.
  • Among the 53 analysts providing recommendations on Facebook stock, 45 recommend a “buy,” six recommend a “hold,” and two recommend a “sell.” As of Thursday, Facebook was trading at a discount of 18.0% from its target price of $248.81.

Pinterest stock’s valuation

As of Thursday, Pinterest was trading at 309.11x analysts’ 2020 adjusted EPS estimate of $0.07 and at 77.10x analysts’ 2021 adjusted EPS estimate of $0.30. Meanwhile, Snap and Facebook were trading at forward PE ratios of 717.91x and 23.17x for 2020, on Thursday, respectively.

Technical level

Based on the closing price on Thursday, Pinterest stock was trading 4.9% above its 20-day moving average of $21.93. The stock is also trading 15.3% above its 50-day moving average of $19.95 and 3.3% above its 100-day moving average of $22.28.

Pinterest’s 14-day relative strength index score is 64, which indicates that the stock is approaching the overbought zone. The stock’s upper, middle, and lower Bollinger Band levels are $23.98, $21.93, and $19.88, respectively. On Thursday, the stock closed near its upper Bollinger Band level, which suggests that the stock is overbought.