Pinterest Only Social Media Asset Likely To See Double-Digit Revenue Growth, Margin Expansion In 2023, Says Analyst; How Minnow Outdid Bigger Rivals In Q3

Zinger Key Points
  • Pinterest may be the only social asset that shows DD% revenue growth and margin expansion, KeyBanc analyst Justin Patterson says.
  • Pinterest's CEO says on earnings call the company is focusing on human-curated content.

After all the tech bloodbath, it was a refreshing sight to see a social media stock rally hard following its quarterly results.
What Happened: Pinterest Inc. PINS shares climbed 9.64% late on Thursday after it reported third-quarter revenue that rose 8% to $685 million and exceeded the consensus estimate of $666.7 million. Adjusted earnings per share of $0.11 were almost double that of the expected number of $0.06 but dropped sharply from last year's $0.28.

The revenue growth slowed from 9% in the second quarter and a whopping 43% in the year-ago quarter.

Pinterest Punches Above Its Weight: Bigger rival Meta Platforms Inc. META, which owns multiple platforms such as Facebook, Instagram and WhatsApp, reported a 4% revenue decline for the third quarter. More importantly, bottom-line results trailed expectations and the December quarter guidance was weak.

See Also: Are Google Investors Overreacting As Parent Stock Slumps 6.5% Post Q3 Earnings? Analyst Says Results Disappointing, 'But Not Terrible'

The company blamed the predicament on increased costs associated with adapting to Apple Inc.’s AAPL privacy policy changes, competition posed by Chinese short-video app TikTok and the fluid macroeconomic environment.

Snap Inc. SNAP, the parent of Snapchat, said earlier this month its third-quarter revenue grew 6%, marking the first time the company posted a single-digit revenue growth since it went public in 2017. Revenue missed expectations, although cost savings helped EPS beat estimates.

Alphabet Inc. GOOGL GOOG shares came under intense selling pressure after it missed expectations both on top- and bottom-line, dragged mainly by a 2% year-over-year drop in YouTube revenue. Search revenue also slowed.

How User Metrics Compare: Pinterest’s monthly active users, or MAUs, remained nearly flat at 445 million and the average revenue per user, or ARPU, grew a stellar 11% to $1.56. In comparison, Snap’s ARPU fell 11% to $3.11, on top of a 4% decline experienced in the previous quarter. Snap, which discloses only daily active users, said its DAUs rose 19% to 3623 million.

Meta family's monthly active users rose 4% to 3.71 billion, and Facebook’s MAUs were up a more modest 2% to 2.96 billion.

Future Perfect: Pinterest guided to mid-single-digit year-over-year growth in fourth-quarter revenue, taking into account a slightly greater forex impact than the 2 percentage point impact in the third quarter. This compares to the 0.60% drop expected by analysts.

Citing uncertainties in the operating environment, Snap did not provide guidance for the fourth quarter. Meta, meanwhile, called for a 3.5-11% year-over-year revenue decline to $30 billion-$32.5 billion. Forex is expected to be a 7% headwind, it added.

Pinterest’s USP: CEO Bill Ready clarified on the earnings call that the company is making the platform more relevant to users by leveraging its unique human-curated content and upgrading its overall content ecosystem.

“In short, we want content that not only inspires users but also helps them make, do or buy things,” he added.

Analyst Upbeat: Commenting on Pinterest’s quarterly results, KeyBanc Capital Markets analyst Justin Patterson said the earnings reinforced his view that companies with the right vertical, region and advertiser size exposure will be less affected than peers in this environment.

“Coupled with an improving MAU base and opex discipline, Pinterest may be the only social asset that shows DD% revenue growth and margin expansion in 2023E,” he added.

Patterson has an Overweight rating and a $28 price target for Pinterest shares.

Price Action: Pinterest stock advanced 9.64% to $24 in after-hours trading on Thursday, according to Benzinga Pro data.

Read Next: Is Pinterest (PINS) Stock A Good Buy

Photo by Burdun Iliya on Shutterstock 


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