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Why Is Pinterest (PINS) Down 5.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Pinterest (PINS - Free Report) . Shares have lost about 5.1% 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 its most recent earnings report in order to get a better handle on the important drivers.

Pinterest’s Q1 Earnings Beat, Revenues Increase Y/Y

Pinterest reported first-quarter 2021 non-GAAP earnings of 11 cents per share, which beat the Zacks Consensus Estimate by 57.1%. The company reported non-GAAP loss of 10 cents per share in the year-ago period.

Revenues surged 78.3% year over year to $485 million and beat the Zacks Consensus Estimate by 3.7%.

Revenues from the United States increased 64.6% year over year to $390 million. Meanwhile, international revenues soared 171.4% year over year to $95 million.

User Base & Advertising Business Details

Monthly active users (MAUs) increased 30% from the prior-year quarter to 478 million globally. Users who began engaging in Pinterest continued to have high levels of engagement amid coronavirus-induced social distancing norms in the reported quarter.

Prior trends, including higher growth in international users and from users under 25 years old, continued in the quarter.

While United States MAUs increased 9% to 98 million, International MAUs grew 37% from the year-ago quarter to 380 million.

Global average revenue per user (ARPU) increased 35.1% from a year ago to $1.04 driven by an increase in advertising demand on the platform.

While ARPU in the United States increased 50% year over year to $3.99, International ARPU jumped 91% to 26 cents.

In the first quarter, Pinterest helped advertisers of all sizes and objectives to create demand and drive sales. Revenues from mid-sized and smaller marketers contributed nearly 50% to total revenues, and attributed conversions on the platform nearly doubled year over year. This was driven by demand for Pinterest’s performance ad products like conversion optimization ads and shopping ads.

Moreover, revenues from retailers with sales objectives comprised more than 20% of total revenues at first quarter-end. Such sales objectives include catalog ad revenues from retailers, and revenues from ads that are optimized for add-to-cart as well as checkout objectives from retailers.

Key Q1 Developments

In first-quarter 2021, Pinterest improved the feature set for Story Pins and began distributing them more broadly. Story Pins support up to 20 pages of content, include a variety of creative editing tools and feature templates for ingredients or instructions so that creators can bring their ideas to life in many ways.

Markedly, the number of Pinners engaging with shopping surfaces on Pinterest grew more than 200% in the 12 months ended Mar 31, 2021 and at the end of first quarter, product searches grew more than 20x year over year.

Starting March, merchants are able to upload, organize, and promote products from multiple feeds within a single business account. This functionality is particularly useful for international merchants and other advertisers who sell different products to different markets.

Additionally, Pinterest’s platform integration went live to Shopify merchants in all its monetizable markets, thereby enabling such merchants to automatically place a Pinterest tag, upload a catalog, receive organic distribution, and launch traffic, conversion, and dynamic retargeting campaigns through Shopify. This is helping small merchants to build their presence on the Pinterest platform.

In the first quarter, to further help merchants, the company partnered with Automattic’s WooCommerce to automate the deployment of its conversion tag and upload of a merchant’s catalog to Pinterest.

Operating Details

Pinterest’s first-quarter 2021 total expenses increased 21.6% year over year to $508.1 million, which include $80 million of share-based compensation following its April 2019 IPO.

For the reported quarter, research and development expenses increased 17.9% from the prior-year period to $171.7 million. Sales and marketing expenses increased 11.4% year over year to $130.3 million due to higher headcount growth.

General and administrative expenses jumped 29.5% year over year to $72.6 million due to higher charitable giving.

Adjusted EBITDA (17.3% of total revenues) was $84 million for first-quarter 2021 versus adjusted EBITDA loss of $53 million in the year-ago quarter.

Non-GAAP costs and expenses grew 21.1% year over year to $407.9 million, attributable to headcount growth.

Loss from operations was $21.6 million, narrower than the loss of $141.1 million in the year-ago quarter.

Balance Sheet

The company ended Mar 31, 2021 with cash, cash equivalents and marketable securities of $2.03 billion compared with $1.76 billion in the previous quarter.

Net cash provided by operating activities as of Mar 31, 2021 was $271 million, reflecting an improvement from $57 million in the year-ago period.

Guidance

Given uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macro economic conditions, the company did not provide its guidance for 2021 revenues and adjusted EBITDA.

For the second quarter, Pinterest expects revenues to grow 105% year over year. Global MAUs are expected to grow in mid teens and U.S. MAUs are likely to be flat on a year-over-year percentage basis.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 21.43% due to these changes.

VGM Scores

At this time, Pinterest has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Pinterest has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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