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Why Is Pinterest (PINS) Down 7.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Pinterest (PINS). Shares have lost about 7.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pinterest due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Pinterest Beats Q1 Earnings Estimates on Solid Revenues

Pinterest reported healthy first-quarter 2022 results with a year-over-year increase in revenues driven by strong demand from retail advertisers. Both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, backed by the strength of the business model and the ability to respond proactively to the evolving market scenario with engaging customer content.

Quarter Details

The company reported GAAP net loss of $5.3 million or a loss of 1 cent per share compared with a loss of $21.7 million or a loss of 3 cents per share in the year-ago quarter. The year-over-year improvement, despite higher operating expenses, was primarily attributable to top-line growth.

Non-GAAP net income in the reported quarter was $69 million or 10 cents per share compared with $78.5 million or 11 cents per share in the year-ago quarter. The figure exceeded the Zacks Consensus Estimate by 6 cents.  

Revenues in first-quarter 2022 soared 18% year over year to $574.9 million and beat the consensus estimate of $568 million. The top-line growth was driven by solid demand from retail advertisers, healthy international businesses and SMB advertisers, partially offset by muted demand from Consumer Packaged Goods advertisers owing to supply chain headwinds. While revenues from the United States and Canada increased 15% year over year to $470 million, that from Europe and Rest of the World soared 27% and 152%, respectively, to $87 million and $17 million.

User Base

Monthly active users (MAUs) declined 9% from the prior-year quarter to 433 million globally as the unwinding of pandemic restrictions led to lower customer engagements as users spent more time outside. In addition, lower search traffic triggered by an algorithm change by Google in November and higher competition from other video-centric consumer apps led to lower customer engagements. While the United States and Canada's MAUs decreased 13% to 94 million, Europe and the Rest of the World's MAUs were down 12% and 6%, respectively, from the year-ago quarter to 120 million and 220 million, led by the Russia-Ukraine war.

Global average revenue per user (ARPU) increased 28% from a year ago to $1.33 buoyed by solid advertising demand. While ARPU in the United States and Canada increased 31% to $4.98, Europe and the Rest of the World’s ARPU surged 40% and 164%, respectively, to 72 cents and 8 cents.

Operating Details

Pinterest’s first-quarter 2022 operating costs increased 14% year over year to $578.6 million due to higher brand marketing campaigns and headcount increase. In the reported quarter, research and development expenses increased 24% to $195.5 million. Sales and marketing expenses surged 37% to $173.9 million.

Adjusted EBITDA (13% of total revenues) was $76.8 million in first-quarter 2022, down from $83.8 million (17% of total revenues). The company launched Pinterest API for Shopping, which will upgrade the product detail pages by incorporating real-time pricing and product availability.

Balance Sheet

The company ended Mar 31, 2022, with cash and cash equivalents of $1,683.8 million. Cash flow at quarter-end was $213.4 million.

Guidance

Pinterest expects second-quarter revenues to grow in the vicinity of 11% year over year. Non-GAAP operating expenses are expected to grow about 10% sequentially. For 2022, non-GAAP operating expenses are likely to grow 35-40% year over year due to increased investments in the native content ecosystem and higher headcount.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 320% due to these changes.

VGM Scores

At this time, Pinterest has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Pinterest has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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