Pinterest nosedives as monthly users decline
Ali Mogharabi, Morningstar Analyst joined Yahoo Finance to break down the key takeaways from Pinterest quarterly earnings and how a loss of users has impacted the company.
Video Transcript
- I want to check in on one stock. We are seeing move in the wake of their latest earnings report. That would be Pinterest. Getting absolutely shellacked today by about 20%.
And that's not due to the results they reported for the quarter actually beat on both its top and bottom lines by Q2 revenue up 125%. Year over year to hit 613 million. But the big mess there was monthly active users surprising to the downside for the quarter.
454 million active users on the platform versus the 484.4 million expected. As the company said people got off its platform as we saw the world open up After the pandemic some tough year over year comps there.
But one analyst is saying fair value is closer to 70 bucks actually increased it by $1 in the wake of that big sell off. And for more on that, I want to bring them on to discuss. What could be a buying opportunity as we see shares come back by a wide margin? Ali Moggharabi analyst joins us once again here.
And when we look at Pinterest, I mean, you know, no one wants to see monthly active users decline that much in a quarter. But talk to me about what you saw it still as you think in fair value at 70.
ALI MOGHARABI: First off, as you know, we weren't necessarily bullish on this name. I think I came on a while back. And we and I certainly talked about it. Right now with-- with basically the 19% to 20% decline, it may create a buying opportunity.
A couple of things that we actually see as attractive. While the user's-- user account is actually declining, or has been or is expected to decline, it did decline year over year. Keep in mind that they're actually facing tougher comps. So they haven't necessarily lived through the-- the-- the pandemic. Last year, which actually helped them increase their-- their user base.
But also keep in mind that monetization-- at user monetization is actually improving tremendously. Part of that, of course, is driven by the return to ad spending overall by the advertisers do this due to the economic recovery. Part of that is also due to the fact that there's more engagement going on by the users that stay on there.
And of course, as we know the users actually get on that platform with the intent to purchase whether in the short term or in the long run. So all of that certainly attracts advertisers. And we actually think that that's going to continue next year and in the long term.
- So let's talk about some of those features that you pointed to that are likely to make the platform a little stickier. Monetization one allowing for transactions on the platform. We also have the company looking to allow users to create content sort of like a stories, or TikTok.
I mean, these are all great ideas. But does it feel like they're a little behind the ball when you compare it to other platforms, other social media platforms that are out there?
ALI MOGHARABI: To a certain extent, yes. But again, keep in mind that as I mentioned earlier that the users on Pinterest do have an intent to purchase something. So they come out there to look for recipes. And that may lead to, of course, purchasing various ingredients and foods and so forth.
They come out there to look for ideas regarding decorations whether inside the home or outside. So that could lead to two additional purchases. So all of those things actually attract the advertisers.
And in terms of the e-commerce that you mentioned, the shopping list we think yes, that we're late to late on that. But I think, again, with the users intent to purchase, I think that will probably keep the users engaged a little bit more to create that shopping list. So they could actually become repeat those transactions and so forth.
Then you're talking about the idea fence. While the idea is similar to stories or TikTok, or even YouTube short-- shorts, they actually increase engagement on there, which certainly attracts those ad. So that's on the user side that's on the content side. Another thing that we see that's really attractive in terms of actually bringing in the advertisers is the enhancements
And/or improvements that they've made on the ROI measurements. Basically the effectiveness of the ads that they place on that platform. So once the advertisers actually see that, hey, there is a pretty attractive ROI on the ads that I purchase on that platform, it's more likely that they will come back.
So on both ends whether it's the user side or the content side or the advertiser side, I think they're making pretty good enhancements, which will certainly help them to-- to grow that top line for that.
- Well, that-- that to me was always to say no to especially when we saw kind of the Delete Uber, sorry the Delete Facebook wave. And the issues that Twitter has had on their platform as well. Pinterest doesn't have to necessarily deal with misinformation. There's not a lot someone can lie about when it comes to your home furnishings or decor I suppose.
And when you look at the emphasis to your point, average revenue per user also more than 100% year over year. And as they improve on all those things you're talking about, it seems like things are looking good actually. And the way they've done it. But the stock down 20%.
And you as I said, up to your fair value from $69 to $71 increase, I guess it would be fair to say even despite that 20% decline here, we're seeing today you're more bullish given kind of the metrics of the game in the quarter.
ALI MOGHARABI: Well, yes, Zach I mean, that's-- that's the thing. You know, you basically, when it comes to stocks you buy low, right? So that 20% decline we think actually could create an opportunity.
We are looking for a slightly wider margin of safety. So we're thinking if it gets to the mid 50s. Then that's where we recommend for new investors to get into the name. That's where we think it's actually safer to get into the name.
But-- but yeah, I mean, when it's declining, it creates a pretty good opportunity. On the fundamental side, everything is still going well for these guys. Fundamentals they're executing pretty well. They are on their way to actually becoming profitable this year, which is what we projected.
Top line growth, the revenue growth will remain pretty strong again while user growth is not going to be that impressive. It's going to be more than offset by that user monetization that we just talked about. So overall, we think things look pretty good for these guys in the short term and in the long run. And that's why we think, you know, once it gets a little bit lower to the mid 50s it will become more attractive.
- Well, it was pretty far away from the mid 50s yesterday obviously. A lot closer after that big sell off. But Ali Mogharabi Morningstar analyst appreciate you coming on here to explain the bull case there if he will.
