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Pinterest (PINS) traded up 36% on Friday after the photo-sharing site beat second-quarter results as advertising demand started to recover in May.
Shares jumped to $34.29 at the close on Friday. The company reported an adjusted loss of 7 cents per share, beating the 14 cents loss per share expected by analysts. Total revenue increased 4% to $272 million, topping the consensus estimate of $251.2 million. Pinterest ended the quarter with 416 million monthly active users, reflecting growth of 39% year-over-year and exceeding estimates of 372.7 million.
Advertising spending growth rates in May improved and June showed further recovery. In July, Pinterest saw a “sharp acceleration” in revenue to about 50% year-over-year growth through July 29.
“This quarter we reached a milestone—more than 400 million people now come to Pinterest every month to get and stay inspired,” said Pinterest CEO Ben Silbermann. “In these tough times, we’re seeing more and more people rely on Pinterest to cook at home, plan kids activities and set up a home office. Businesses are helping them turn their ideas into reality as people are increasingly discovering and buying products on Pinterest.”
Silberman said that during the reported quarter, total daily video views, which include both organic and paid, grew over 150% year-on-year, adding that the company intends to do more in the video space.
Looking ahead, Pinterest Chief Financial Officer Todd Morgenfeld said that the company expects revenue will grow in the mid-30s per cent range year-over-year in Q3, which implies a decline from the roughly 50% year-over-year growth rate seen quarter-to-date through July. The outlook is based on expectations that cases of COVID-19 are rising and that renewed lockdowns would likely have a negative impact on advertiser demand.
Robert W. Baird analyst Colin Sebastian raised the stock's price target to $35 from $20 and maintained a Buy rating, saying that Pinterest’s "impressive" user growth and "rapid" improvement in monetization during Q2 are driven by the recent platform enhancements and the commercial nature of the platform.
Sebastian cautioned that any benefit from the social media boycott "could be fleeting as management suggested limited visibility in retaining new advertisers”. However, the analyst raised his Q3 estimates for Pinterest amid expectations for robust user growth and to reflect "bullish" Q3 commentary.
Overall the stock scores a Moderate Buy analyst consensus, with the majority of analysts preferring to stay on the sidelines for now. With shares up 84% year-to-date, the $27.88 average analyst price target indicates 19% downside potential from current levels. (See PINS stock analysis on TipRanks)
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