February 9, 2024

Shares of Pinterest (PINS) are selling off today after Q4 earnings came in slightly below expectations (food and beverage weakness a culprit), though the big-picture story remains one of a company that’s made a number of operational adjustments and launched a series of growth initiatives that should drive higher revenue and EPS growth in 2024. I think the recovery story is intact and the stock’s worth owning. Keeping at buy half.

Pinterest (PINS) Down On Earnings. Still A Buy

In Q4, revenue was $981.3 million (+12%) versus expectations of $991 million. Guidance for Q1 ranges from $690 - $705 million, leaving some potential it could miss/exceed consensus of $702.3 million depending on how the chips fall. Some uncertainty here is why the stock isn’t screaming higher with other growth names. Hopefully that means opportunity.

Stepping back, revenue growth in 2023 was just 9% and this should at least double in 2024 and remain in the high teens into 2025. Adjusted EPS growth in 2023 was 78% ($1.09) and should grow by 22% in 2024 (to around $1.33).

Back to Q4, retail was the fastest-growing segment and video ads (helped by AI) are pushing over 30% of revenue, thanks in large part to Gen Z engagement.

In terms of growth initiatives, Pinterest announced an advertising partnership with Google (the third such deal) that’s gone live in international markets (where there’s considerable potential to monetize a growing user base). In addition, the previously announced partnership with Amazon is ramping early in Q1, a positive sign.

Lastly, Wall Street opinions remain skewed positive on PINS so I suspect the current weakness will draw buyers in. Here are a few of the latest ratings (PINS is trading near 36):

§ RBC, price target raised from 46 to 48. Outperform.

§ Susquehanna, price target raised from 35 to 45.

§ JPMorgan, price target raised from 35 to 38. Neutral.

§ Wedbush, price target raised from 35 to 38. Neutral.

§ Goldman, price target drops from 42 to 41. Buy.

§ Barclays, price target raised from 29 to 36. Equal weight.

§ Morgan Stanley, price target raised from 25 to 33. Equal weight.

Tyler Laundon

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.