Pinterest soars on better-than-feared Q2 results and comments from its recently named CEO (PINS)
12:31 pm Thursday, July 14th, 2022
While its peers Snap (SNAP) and Meta Platforms (META) sold off on weak advertising revs in Q2, Pinterest (PINS +10%) is looking as neat as a pin today despite missing earnings estimates and also facing a challenging digital advertising environment in Q2. With multiple red flags in the weeks leading up to PINS’ report, the market had ample time to digest a slowdown in advertising spending. As such, the social media company is jumping on better-than-feared results.
Investors may also be excited about PINS’ new CEO Bill Ready, the former President of Commerce, Payments, and Next Billion Users at Google (GOOG), who took the reigns just over a month ago. Mr. Ready provided a few details on his strategies for the company going forward, stating that he does not subscribe to a “growth at all costs” mentality. Instead, he is focused on long-term growth, believing that constraints breed creativity and lead to better product outcomes. Furthermore, the new CEO commented that PINS plans to return to meaningful margin expansion in FY23.
In Q2, adjusted earnings fell 56% yr/yr to $0.11 while revs climbed 9% to $666.0 mln. PINS noted that the digital advertising space has been and will remain a challenge. Although the company saw strength from retail and international advertisers, demand from its more vital base of consumer packaged goods, big box retailers, and mid-market advertisers softened.
However, even after advertising slowed down in Q2, PINS still topped revenue estimates, a positive standout when stacked against META, which missed Q2 sales targets by a wide margin, posting its first yr/yr quarterly revenue decline.
Still, on the bright side, MAUs were unchanged from the previous quarter, which is no worse than what we already saw from META, which saw MAUs go from 2.94 bln in Q1 to 2.93 bln in Q2.
Looking at Q3, PINS expects revenue growth in the mid-single-digits percentage yr/yr, meaningfully lower than consensus. Again, investors expected far worse, particularly after META’s remarks last week regarding a continuation of weak advertising demand in Q3. Also, PINS anticipates MAUs to return to more typical seasonal engagement patterns in 2H22, which historically showed modest sequential growth.
However, PINS cautioned that these trends could be more muted due to current macroeconomic conditions. The company also warned that revenue growth could land toward low-single-digits if conditions deteriorate further.
Even considering PINS’s cautiously optimistic outlook, shares are still soaring today as the company’s Q2 numbers were largely more upbeat than investors expected. Along with excitement surrounding a new leader, involvement from activist Elliott Management could also be helping push the stock higher. Mr. Ready touched on Elliot Mgmt’s involvement stating that the two companies have had collaborative and engaged dialogue and that Elliott is aligned with PINS’ vision of what it can become. This signals that despite Elliott Mgmt typically buying into an organization to spur change, perhaps the company likes what it sees in PINS’ potential.
