Can Pinterest Sustain its Growth Surge Following Impressive Q1 Earnings?
Inflation concerns continued to way on stocks this week, but big tech earnings and a weakening labor market helped the bulls battle back to their second straight week of gains. The best-performing concepts are EV charger, Social media and Lidar concept.
Considering the different perceptions of the stock, this time TigerPicks chose $Pinterest, Inc.(PINS)$ to have a fundamental highlight to help users understand it better.
$Pinterest, Inc.(PINS)$
Pinterest is experiencing major user growth with a 12% year-over-year increase in MAUs to 518 million.
The company is focusing on improving user engagement and monetization through AI-driven content and ad formats.
Pinterest's Q1'24 revenue guidance and strong financials suggest sustainable high teens growth and potential for solid shareholder returns.
PINS stock is reasonably valued at 20x forward EPS targets.
Pinterest Stock Surges After Reporting Q1 Earnings
Pinterest, Inc. is back in major growth mode as the company pushes through solid user growth while the monetization story remains the major catalyst. The social imaging stock has rightfully surged on the news.
Finviz Chart
Source: Finviz
User Growth Machine
As with any social media play, user growth is one of the best ways to drive growth. More users usually means more money whether via advertising or subscriptions.
In this case, Pinterest grew Q1'24 ad revenues with the following quarterly numbers:
News feed
Source: Seeking Alpha
The company grew MAUs by 12% year-over-year to 518 million. Pinterest took until this year to top the COVID peak back in Q1'21 and now the social imaging site is generating accelerating growth and has topped the prior peak by 40 million MAUs.
chart
Source: Stone Fox Capital/Compnay reports
On the Q1'24 earnings call, the CEO discussed significant improvements to the site suggesting higher engagement going forward along with more ad formats for improving monetization. Pinterest has utilized next-gen AI to lean into focusing on content with a commercial intent vs. pure entertainment leading to higher engagement and helping the partnership with retailers on their shopping strategy.
Importantly, the company continues to see user engagement growing faster than the 12% user growth. Any platform is ultimately valued based on how many people use it on a daily basis as engagement levels are vastly different for a person using Pinterest an hour a day vs. someone for an hour a month. The daily user is worth up to 30x more than the monthly one counted the same in MAUs.
Pinterest continues to see growth in Shop Similar and Shop the Look features. The company suggests outbound clicks to advertisers, such as via $Amazon.com(AMZN)$ ads, more than doubled YoY.
As long as Pinterest is adding users in RoW, the ARPU metric is difficult to grow. For Q1'24, ARPU still grew 10% YoY to $1.46 despite the RoW users growing the fastest only monetizing at $0.11 per user.
slide
Source: Pinterest Q1'24 presentation
These metrics are still miles below the numbers produced by $Meta Platforms, Inc.(META)$ having hit an $11.20 ARPU during the March quarter per daily user. This number now includes a large amount of users outside of Facebook that aren't monetized at a high rate.
Valuation
Pinterest has jumped nearly 20% to $40 on the great quarterly report. The company guided to Q2'24 revenue of $835 to $850 million for up to 20% growth while the market cap has soared to $27 billion.
The management team has guided to sustainable high teens growth over the next few years. The monetization opportunity would suggest this possibility is legitimate with growth in direct links value capture and the emerging contribution from third-party demand partnerships.
The stock is a great long-term investment opportunity. Investors probably shouldn't aggressively buy at higher valuations than the current 7x sales targets of 2024 sales of $3.7 billion, but Pinterest should ride the growth higher over time.
The market will increasingly start looking toward profit levels to value the stock. In Q1'24, Pinterest reported a GAAP loss of $25 million with an adjusted EBITDA of $113 million.
The normal valuation metric would be adjusted profit and neither of these numbers provides this metric. The ironic part is that non-GAAP net income was $140 million due to adjusted EBITDA, excluding $31 million in interest income plus some other true costs.
table
Source: Pinterest Q1'24 earnings release
Pinterest reported an adjusted profit of $0.20 per share, up from only $0.08 last year. The consensus EPS estimates have earnings jumping to $0.27 in Q2.
The market targets the 2024 EPS increasing over 30% to $1.42 and hitting $1.74 in 2025. The stock is increasingly intriguing based on these earnings alone. Pinterest only trades at slightly above 20x the forward earnings and the company has small operating margins, as of now.
Pinterest produced $356 million in operating cash flows during Q1, up nearly 100% from last Q1. The company now has a cash balance of $2.8 billion and the cash flows provide the ability to invest in the future or start returning capital to shareholders.
Takeaway
The key investor takeaway is that Pinterest has returned to a strong growth story. The company has multiple ways to win via growing engagement and monetizing the existing engagement at a vastly higher rate via lower funnel direct links and third-party partnerships.
The stock will likely surge to new multi-year highs based on these numbers. Investors should've chased the stock, but Pinterest remains a solid value here at $40 and the opportunity exists for sustainable growth in the 20% range, leading to solid shareholder returns over time.
Stock Price Forecast:
Based on 30 Wall Street analysts offering 12 month price targets for Pinterest in the last 3 months. The average price target is $42.90 with a high forecast of $50.00 and a low forecast of $33.00. The average price target represents a 6.16% change from the last price of $40.41.
Resource:
https://seekingalpha.com/article/4688176-pinterest-q1-earnings-multiple-ways-to-win
What are your thoughts on $Pinterest, Inc.(PINS)$?
Or do you know other companies in the industry?
Please leave your comment below.
🎁Prizes
All Tigers who leave valid comments in the comments section will receive Tiger Coins.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
$Pinterest, Inc.(PINS)$ is not a stock one would topically look at...
however, given the company's stellar performance, things may be about to change.
this could be a company who has quietly built its fundamentals upon a good foundation and seeing it comes to fruition.
as the chart shows, the stock is trending at its all time high.
on the other hand, could it be just a surge for the time being and then start trending down [Thinking] [Thinking] [Thinking]
hope it can continue to grow...
perhaps this stock is worth putting on your watchlist...
@TigerGPT @Shyon @GoodLife99 @Universe宇宙 @rL @LMSunshine @koolgal @Aqa @HelenJanet
What are your thoughts on $Pinterest, Inc.(PINS)$?
Or do you know other companies in the industry?
Please leave your comment below.
leave valid comments in the comments section will receive Tiger Coins.
Pinterest attributed its recent growth spurt to its overseas expansion, the rising popularity of its mobile app, an influx of Gen Z users which curbed its dependence on its older Millennial and Gen X users, fresh video content, new AI-driven recommendations, and the integration of more e-commerce tools into its platform.
Pinterest has clearly overcome its post-pandemic slowdown and continues to expand its niche of the social media market with its interest-based pinboards. It's gone on a wild ride since its IPO, but it's still more than doubled from its IPO price, and it should head even higher over the next 12 months as it locks in even more users.
@CaptainTiger @MillionaireTiger @Tiger_comments @Daily_Discussion @TigerGPT @TigerStars @TigerPicks