Market Sells Off Pinterest, But Sell-Side Less Concerned About Soft Guidance

Pinterest Inc. PINS may have offered a soft outlook for the year, but sell-side analysts said Friday little has changed on the newly-public company’s long-term narrative.

Pinterest shares were hit hard after the company projected a bigger-than-expected EBITDA loss for the year. The pessimism surrounding the weak guidance drove the stock down even as revenue topped Street expectations after rising 54 percent year-over-year. International revenue more than doubled over the year.

The Analysts

Nomura Instinet’s Mark Kelley reiterated a Buy rating and a $34 target.

UBS Securities analyst Eric Sheridan reiterated a Neutral rating and a $31 target.

Bank of America Merrill Lynch’s Justin Post reiterated a Neutral rating and a $32 price target.

Remain Confident

Kelley acknowledged the disappointing earnings report but believes expectations have been reset and the company’s long-term business drivers are intact.

“Our estimates change only slightly, and we remain confident in our longer-term thesis that Pinterest will be a much larger company over time as MAUs continue to ramp and the monetization gap continues to close,” Kelley wrote in a note to investors.

Kelley also noted management suggested critical e-commerce functionality could come into play as early as next year, ahead of Nomura’s estimated timeline.

More International Ads

Sheridan also took away positives from the company’s forward look, particularly around the notion that Pinterest’s international ad business rollout looks on track, with the company now serving ads on its site in 13 global markets, up from seven in the fourth quarter.

But there are still negatives that keep Sheridan from being more bullish, including management’s reiteration that 2019 will be an investment year, with returns not expected until 2020.

Exuberant Expectations

Post said investors may have expected too much from Pinterest in its first earnings report, given a strong share price run up after the IPO. Post noted the guidance, while underwhelming to investors apparently, was in-line with Bank of America's estimate.

“We think a generally solid 1Q with no thesis changers,” Post wrote. “Selloff due to strong post-IPO stock performance and exuberant expectations.” BOA even slightly raised its estimates going forward, though Post remained Neutral on the stock.

Price Action

The sell-off continued Friday as Pinterest shares traded down 12.2 percent to $27.13 at time of publication.

Related Links:

Pinterest Shares Crushed After Big Q1 Earnings Miss

The Street Is Out With Pinterest Ratings