Pins Stock

Pins Stock – Pinterest ( NYSE:PINS ) stock fell 11% in early trading. However, the social media website reported stronger than expected first quarter results and opened a new partnership with Amazon (NASDAQ:AMZN).

Investors were disappointed by the company’s guidance, which unexpectedly accelerated the company’s top-line growth and had higher cost growth.

Pins Stock

Pinterest’s Q1 revenue rose nearly 5% compared to the same period last year, slightly above the average analyst estimate of 3%. Its earnings per share excluding certain items is 8 cents and the average view of analysts is 2 cents.

Why Pinterest (nyse:pins) Stock Rose After Earnings The Business In Lift Off Mode

However, its adjusted net income decreased by 16% year-over-year (YOY), while its share-based compensation increased by nearly 100% YOY to $143 million.

Meanwhile, Pinterest and Amazon announced an advertising deal. Under the agreement, Pinterest will host ads for Amazon, sending Pinterest users directly to Amazon’s website. The deal “will be spread over many quarters”

Pinterest expects its Q2 top line to grow around 3.5%-5%, compared to the average analyst estimate of 6%. In addition, the company expects its operating expenses, excluding certain items, to increase by approximately 13% in Q2 compared to Q1.

Investors should try to gauge how well Pinterest can control its costs and accelerate its top line growth. Starting next year, Amazon will try to determine how the deal will affect Pinterest’s financial results.

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As of the date of publication, Larry Ramer does not hold any positions (direct or indirect) in the securities discussed in this article. The views expressed in this article are those of the authors under publication guidelines.

Larry Ramer Researches and writes articles about stocks. 15 years. He has worked for The Fly and Israel’s largest business newspaper, the Globes. Larry began writing columns in 2015. Among his most successful contrarian picks are PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer. My rating for Pinterest, Inc. (NYSE:PINS) is a hold. I previously wrote about PIN in an article published on February 18, 2022. In that article, I noted that Pinterest shares “will struggle to return to the $50 level” as PINS values ​​are reduced due to slowing income growth. expectations.” Since then, Pinterest’s stock price fell from $24.72 (the price at the time of publishing my previous update) to $21.49 on May 16. For this article, I reviewed the latest quarterly results of PINS, its outlook, catalysts and long-term growth prospects.

In five years, Pinterest should have a large percentage of revenue from international markets and become a company with significant growth in user-generated content, promoted by new products such as of Idea Pins. On the other hand, the future developments of PINS in the next two years will be affected by further changes in the search algorithm and tougher competition from competitors with deeper pockets. The composite 5-year outlook for the company supports my neutral view and the hold rating assigned to PINS.

PINS shares are down -6.4% over the past month, slightly better than the S&P 500’s -9.8% decline over the same period. As the chart below shows, Pinterest’s outperformance relative to the broader market came in late April and early May, which coincided with when PINS reported Q1 2022 earnings.

Pinterest Prices I.p.o. At $19 A Share, For A $12.7 Billion Valuation

Pinterest’s share price performed well against the S&P 500 last month, as several key financial numbers from PINS headlined investors’ expectations for the first quarter of 2022.

PINS issued the company’s Q1 2022 earnings press release after trading hours on April 27, 2022, and it delivered top line and bottom line beats for the most recent quarter.

Pinterest’s revenue rose +18% YoY from $485 million in Q1 2021 to $575 million in Q1 2022 and was slightly above the Wall Street consensus sales estimate of $573 million (+0.4%). In its Q1 2022 earnings briefing, the company attributed its top-line expansion in the most recent quarter to “strength from retail advertisers, our international business and our managed SMB advertisers .”

More importantly, PINS’ first quarter non-GAAP adjusted earnings of $0.10 were above the market consensus EPS estimate of $0.04. But Pinterest’s earnings loss in Q1 2022 is not as good as it looks on paper, and that affects my assessment of PINS’s near-term outlook, which I explain in more detail in the next section. .

Why Pinterest Stock Is A Great Growth Stock To Buy And Hold

While some of PINS’s Q1 2022 metrics for revenue and earnings exceeded market expectations, I’m not confident in Pinterest’s short-term future. There are three main reasons why I am not very bullish on the near-term prospects of PINS.

First, Pinterest’s bottom line beat was driven more by the timing factor than better profitability or better-than-expected revenue growth (just a marginal beat).

PINS admitted in its Q1 2022 results that “we made some creative marketing expenses from the beginning of the year to the latter half of the year.” The company cited “slower-than-desired hiring growth” as another factor that led to lower-than-expected expenses in the first quarter of this year in its latest quarterly investor briefing. This suggests that Q1 2022 may not be a good indicator of Pinterest’s earnings in later quarters this year, as some of the company’s budgeted costs and investments have been deferred.

Second, PINS performed poorly on a key activity metric, Global Monthly Active Users, or MAUs. MAUs on Pinterest decreased -9% YoY from 478 million in Q1 2021 to 433 million in Q1 2022, according to the results of the first quarter media release. According to

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Data, PINS’ first quarter MAUs were -1% below the consensus MAU projection of around 438 million sold.

Pinterest’s MAUs for Q1 2022 were lower than the company’s previously disclosed estimate of 436.8 million MAUs for the full year 2022 (as of February 1, 2022). As Pins noted in the company’s recent quarterly earnings call, the difference between February’s year-to-date and actual first-quarter MAU data was attributed to “lower traffic from search,” which ” caused by the search algo change starting in Q4 ( 2021).

Notably, I also cited PINS’ FY 2021 results, noting in management comments that “search algorithm changes from Google (GOOG) (GOOGL)” “were stronger than we have seen in history” in my previous article in February. Pinterest’s low first-quarter MAU suggests that Google’s upcoming algorithm changes will drive the company’s financial and operating performance.

My pessimistic predictions of Pinterest’s short-term future have been confirmed by the PINS management guide. As indicated in the Q1 2022 earnings press release, Pinterest expects +10% QoQ growth in the company’s operating expenses, from +18% in Q1 2022 to +11% in the second quarter of 2022, in the long line of its expansion. Q2 2022.

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The major catalysts coming for Pinterest should be realized in the medium-long term rather than the short term.

According to the earnings media release, the US and Canada geographic region contributed 22% of Pinterest’s MAUs in the first quarter of 2022, but the majority, or 82%, of top-line PINS in the most recent quarter. The difference between MAUs and revenue contribution clearly shows that Pinterest has opportunities to get a larger share of sales from markets outside of North America in the future.

Q1 2022 also marks a significant change for Pinterest in terms of financial reporting. This is the first quarter that PINS has disclosed revenue and MAU exclusively for the European region. Previously, Pinterest only provided data for US and non-US markets. More importantly, PINS also committed to providing information about “further details in those areas” in the Q1 2022 investor call “as our international operations become a more significant part of our business.”

One of the main reasons for the YoY decline in MAUs for Pinterest in Q1 2022 is that work-from-home tailwinds are no longer the driving force for PINS as economies reopen. It is even more important for PINS to invest in new products to drive the company’s future growth organically rather than relying heavily on favorable external events.

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One new product segment that is gaining traction is Idea Pins. Idea Pins are described as “our multi-page video format” that allows its users to “interact with video and explore content directly on Pinterest,” according to the company’s website.

Idea Pins have been very successful since their product launch in the middle of last year. PINS announced in the company’s Q1 2022 results that “the number of video idea pinners grew 15x year over year.” Pinterest also acknowledged spending on Idea Pins as part of its investments to “bring more local content to Pinterest.”

The upcoming success of new product launches like Idea Pins should be one of Pinterest’s key drivers.

The main drivers of Pinterest’s growth in the next five years will be overseas market expansion and new product innovation as discussed in the previous section. On the other hand, the main disadvantage is accidents

Pinterest Stock Up 12% On Users, Elliott Backing

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