Chart of the Week: Is Pinterest Stock a Buy After Latest Earnings?

November 5, 2021

The earnings-palooza rolls on in the US as an avalanche of third-quarter results came in this week, providing a snapshot for investors on the health of the US stock market.

On the whole, it’s been a positive earnings season for companies in the world’s largest economy. October saw all three major indices close at record highs.

And as at the end of last month, more than 80% of S&P 500 companies that had reported numbers had beaten estimates.

Being watched closely, following negative sentiment on Snap Inc’s (NYSE: SNAP) latest earnings, Pinterest Inc (NYSE: PINS) released its own numbers after the close on Thursday (4 November).

How did this emerging social media stock perform and is its stock a buy after a rumoured acquisition by payments giant PayPal Inc (NASDAQ: PYPL) fell through?

Revenue growth remains strong

Pinterest, an image sharing and discovery platform, has had a tough 2021, with its own shares down around 36% year-to-date – as of Thursday’s close.

Yet Pinterest shares were actually up 250% in 2020 as the world went into lockdown amid the Covid-19 pandemic and people took to using its “Idea Pins” to inspire them on their purchases.

Sentiment has been negative since its second-quarter 2021 results showed its monthly active user (MAU) base dipped year-on-year.

Yet the more important question investors should focus on is; can Pinterest monetise its users? On this front, the latest results have answered that with a resounding “yes”.

Like other tech platforms in their early days, its true value lies in grasping the international opportunity. Here, Pinterest’s revenue growth rate in the third quarter was a whopping 96% year-on-year (see below).

A still-impressive US$633 million in quarterly revenue, up 43% year-on-year, suggests that the company has momentum going into the all-important fourth quarter (and holiday shopping season).

While there are lingering concerns on another drop in MAUs, to 444 million, its more lucrative mobile audience is holding up well (with international mobile users actually up by a double-digit percentage rate year-on-year).

Average revenue per user (ARPU) was up 37% year-on-year overall while Pinterest’s international ARPU surged 81% year-on-year.

With more and more shoppers turning online for sources of inspiration, and with Pinterest increasingly providing them to means to shop directly via its platform, the company’s growth story remains intact.

Pinterest revenue Q3 2021

Source: Pinterest Q3 2021 earnings presentation

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Pinterest Inc.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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