Pinterest Q2 Results: The Power Of Low Expectations
Pinterest (NYSE:PINS) $Pinterest, Inc.(PINS)$is a leading global social media platform with a mission to 'bring everyone the inspiration to create a life they love'. Its platform is used by 'Pinners' to discover ideas and be inspired, whether that's looking for your next favorite outfit or deciding how you want to remodel your kitchen.
It's been a difficult year for Pinterest shareholders, with the stock down 65% from its 52-week high & 75% from its all-time high back in early 2021. This has been driven by a combination of factors, but the primary concern from Wall Street was Pinterest's apparent haemorrhaging of MAUs (monthly active users).
On the face of it, these were not brilliant results for Pinterest. Revenue of $666m represented growth of 9% YoY, coming in below management's guidance of 11% YoY & also below analysts' estimates of $671m. Guidance for Q3'22 also came in way below analysts' estimates, with 'mid-single digits YoY growth' implying revenues of $652-$677m for the quarter, whereas analysts were expecting revenue of $721m - so, a pretty horrendous guidance miss.
Despite this miss, there are some positives that could be responsible for the share price pop. Firstly, there are signs that the MAU decline has certainly stabilized, hitting a recent low of 431m MAUs in Q4'21, followed by two consecutive quarters of 433m - good news! The YoY trend is also changing direction, with the -5% YoY decline in Q2 being the first quarterly improvement in MAU YoY growth since Q2'20.
Another positive is Pinterest's ARPU, which continues to grow at a rapid pace. This explains why Pinterest has still been consistently growing revenues despite losing MAUs, as it is able to extract more and more value from its Pinners.
Elliot Management, one of the world's largest activist funds, recently took a substantial stake in Pinterest which led it to become the company's largest investor. On 1st August 2022, they released the following statement outlining their rationale for this investment:
Pinterest is a highly strategic business with significant potential for growth, and our conviction in the value-creation opportunity at Pinterest today has led us to become the Company's largest investor. As the market-leading platform at the intersection of social media, search and commerce, Pinterest occupies a unique position in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader to oversee Pinterest's next phase of growth. We commend Ben Silbermann and the Board on the leadership transition, and we look forward to continuing our collaborative work with Ben, Bill and the Board as they drive toward realizing Pinterest's full potential.
This is another promising sign, and further validation of investors' optimism surrounding Bill Ready's leadership & the potential of the Pinterest platform.
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