Why Are Investors Putting the Pin in Pinterest?
Stock Analysis & Ideas

Why Are Investors Putting the Pin in Pinterest?

Shares of Pinterest (NYSE: PINS) were up by more than 10% in pre-market trading on Friday as the social media company’s Q3 earnings beat estimates. In contrast, shares of SNAP had plunged following its Q3 results while META was down by more than 20% following its disappointing Q3 results.

When it comes to PINS, what seems to have reassured investors is that the company seems to have stabilized its user base.

Globally, Pinterest’s Monthly Active Users (MAUs) were 445 million. The company’s management stated on its earnings call that it seems to have “lapped headwinds from the pandemic unwind and have driven improvements in user engagement.”

More importantly, PINS’ U.S. and Canada MAUs grew quarter-on-quarter for the first time since Q1 2021 to 95 million.

Pinterest’s ARPU Is Increasing

In Q3, Pinterest’s Average Revenue Per User (ARPU) was up 11% year-over-year to $1.56. Pinterest’s management stated on its Q3 earnings call, “Better-than-expected strength came from large U.S. retail advertisers who have been more resilient and often seek lower-funnel objectives and shopping goals.”

In contrast, Snap’s (SNAP) rise in daily active users is not translating to higher ARPU. The social media giant delivered mixed results in Q3.

SNAP’s daily active users in the third quarter came in at 363 million versus expectations of 358.2 million. Unfortunately, SNAP’s ARPU fell 11% to $3.11.

Shares of SNAP have tanked 79.5% this year and the stock is currently hovering near its 52-week low.

Pinterest’s Peer META Not Faring Better

Among other social media companies, Meta Platforms (META) fared even worse as Q3 earnings of $1.64 missed the Street forecast of $1.86 while revenues came in at $27.71 billion, a drop of 4.5% year-over-year. The company is facing mounting headwinds as it goes into Q4.

What has raised eyebrows among analysts when it comes to META, however, was the disappointing outlook as it expects revenues to come in between $30 billion to $32.5 billion in Q4 and anticipates incurring significant costs in splashing on the metaverse.

Is PINS a Good Stock to Buy?

Analysts are cautiously optimistic about PINS with a Moderate Buy consensus rating based on eight Buys and 12 Holds. The average price forecast for PINS stock is $27.06 implying an upside potential of 23.6% at current levels.


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