Market Overview

The Street Reacts To Pinterest's Big Q2 Beat

The Street Reacts To Pinterest's Big Q2 Beat

Pinterest Inc (NYSE: PINS) reported second-quarter results, which showed a 62% increase in revenue from the same quarter last year to $261 million. This handily beat the $236 million analysts were expecting.

Pinterest's second ever earnings report as a public company marks a turnaround from a poor debut performance.

'Big Beat'

Pinterest's report was highlighted by a "big beat" across the board, Nomura Instinet's Mark Kelly wrote in a note. Some of the notable metrics include total monthly active users (MAUs) hitting 300 million, average revenue per user (ARPU) accelerated to 29% growth and users watched more videos during the single quarter than all of 2018.

Kelly said management introduced new products and features to make it easier for advertisers to join its platform in the quarter. This coincides with a successful expansion into six new advertising markets, which brings its total to 19.

Related Link: Why Pinterest Is Different Than Traditional Social Media Platforms

Opportunity Ahead

Pinterest's guidance for the full year implies it will see a slowdown in growth in the back half of the year, Wedbush's Ygal Arounian wrote in a note. Taking a longer-term view, the company has plenty of growth prospects from ad product initiatives that are in the early stages. The ultimate objective is to transform Pinterest into a platform where users can shop and spend money and gain wallet share over time.

"We often hear advertisers in test phase with the platform rather than fully committed, but we see this as more of an opportunity than a challenge," Arounian wrote.

Pinterest deserves credit for a "solid job" in the second quarter and explaining its outlook, UBS's Eric Sheridan wrote. The company has a unique opportunity to take advantage of growing e-commerce activity while advertisers continue to flock from offline to online channels.

However, Pinterest's stock has already gained around 50% since its initial public offering, Sheridan wrote. Coupled with the stock lockup on Oct. 15, shares of Pinterest aren't offering investors a compelling risk-reward profile.

Regulatory Environment

One of the bigger concerns social media investors have to deal with is rising regulatory risk. Pinterest is able to stand out in the field with its privacy-related strategy, which gives it a competitive advantage against its larger rivals. This is becoming "increasingly important in today's global regulatory environment," DA Davidson's Tom Forte wrote.

Ratings And Price Targets

  • Nomura Instinet maintains at Buy, price target lifted from $34 to $39.
  • Wedbush maintains at Outperform, price target lifted from $33 to $38.
  • UBS maintains at Neutral, price target lifted from $31 to $32.
  • DA Davidson maintains at Neutral, price target lifted from $23 to $28.

Pinterest's stock traded higher by 17% Friday afternoon at $3 per share.


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