Earnings on Pinterest: what to watch on November 4th

Pinterest (NYSE: PINS) is expected to release its third quarter 2021 results after market close on Thursday, November 4. A conference call with analysts is scheduled for the same day at 6 p.m. EDT.

Investors in the image-sharing platform operator will likely approach the report with a fair amount of caution. This statement is probably even truer after the news last week that sent actions on a roller coaster, up and down.

Reports on Wednesday revealed that the financial technology giant Pay Pal (NASDAQ: PYPL) is in late-stage talks to acquire Pinterest at around $ 70 a share. If these reports turn out to be true, that would be good news for investors who bought Pinterest shares before the end of 2020, as they were trading below that level until then. For context, Pinterest stock closed at $ 58.06 on Friday.

Pinterest and other social media actions fell after Friday Breakthe publication of its third quarter results. The owner of the Snapchat messaging app reported lower revenue and revenue forecasts than Wall Street expected. The company said Apple‘s (NASDAQ: AAPL) privacy changes related to mobile app advertising hurt its revenue. Investors fear a similar dynamic could occur with Pinterest.

In 2021, the Pinterest share is down 11.9% through Friday, behind S&P 50022.4% yield. Despite being 35% off its all-time high, set in February, it’s still a big winner since 2020, when the surge in user numbers triggered by the pandemic propelled it to a 254% gain. . Since January 1, 2020, stocks have risen 212%, compared to the 45% return of the broad market.

Here’s what to look out for in Pinterest’s Q3 report.

Image source: Getty Images.

Pinterest key figures

Here are the company’s third quarter 2020 results, its forecast for the third quarter of 2021, and Wall Street’s consensus estimates to use as benchmarks.

Metric Q3 2020 result Pinterest tips for Q3 2021 Wall Street Consensus Estimate in Q3 2021 Wall Street Projected Change (YOY)
Returned $ 442.6 million Growth in the lower 40% range $ 631.2 million 43%
Adjusted earnings per share (EPS) $ 0.13 N / A $ 0.23 77%

Data sources: Pinterest and Yahoo! Finance. YOY = year after year. Note: Pinterest has not published a revenue forecast.

For the background, in the second quarter, Pinterest revenue jumped 125% year-over-year to $ 613.2 million. This result accelerated by the consensus estimate of Wall Street of 561.9 million dollars as well as the forecasts of the company of a growth of 105%. Adjusted net income was $ 169.9 million, or $ 0.25 per share, compared to an adjusted loss of $ 38.4 million, or $ 0.07 per share, during the period. the previous year. This result was almost double the $ 0.13 per share expected by analysts.

Shares fell more than 18% the day after the release, despite pleasant surprises in Q3 earnings and earnings expectations which were also higher than expected. The culprit was the growth in the number of users in the United States which did not live up to management’s forecasts.

Key user statistics

Management did not provide guidance for the third quarter monthly active users (MAUs), citing the uncertainty surrounding the pandemic. However, the release of last quarter’s results said, “The headwinds of engagement on Pinterest continued into July. As of July 27, 2021, US MAUs have declined by about 7% and global MAUs have increased by about 5% year over year. “

Pinterest’s revenue is determined by two metrics: the number of global MAUs and the global average revenue per user (ARPU), which reflects the ad rates achieved.

In the last quarter, global MAUs rose 9% year-on-year to 454 million, and global ARPU climbed 89% to $ 1.32. “What scared many investors is that US MAUs fell 5% year over year to 91 million,” as I wrote earlier. “Pinterest had led the US MAUs to be roughly stable compared to the period last year.”

Fourth Quarter Orientation

The market is looking to the future, so Pinterest’s forecast could be even bigger than its third quarter results compared to how its stock is going.

For the fourth quarter, analysts model that Pinterest’s revenue will grow 24% year-over-year to $ 876.7 million and its adjusted EPS will rise 9.3% to $ 0.47.

Focus on the long term

Long-term investors should remember that a quarter is only a quarter and not overreact to third quarter results. If you’re not a short-term trader, the outlook for Pinterest over the next several years and beyond is what’s important.

I continue to favor Pinterest in the broad social media category. The main reason is that the “business platform is product centric – in a way that is reminiscent of Amazon‘s – so that’s a particularly good alignment with an advertising business model, ”I wrote in fall 2019, and I still believe in it.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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