Photo-sharing social-media platform Pinterest (NYSE:PINS) delivered expectation-beating second-quarter 2024 results on Wednesday. Moreover, Pinterest anticipates moderate but respectable current-quarter revenue growth. Nevertheless, traders immediately sold PINS stock, and investors can capitalize on this excessive response by considering buying just a few shares.
Pinterest’s Q2-2024 global revenue grew 21% yr over yr to $854 million. Analysts had only called for $847.8 million in quarterly revenue, on average. To this point, so good.
Moreover, Pinterest’s global monthly energetic user count increased 12% to 522 million, a record for the corporate. That’s one other beat, as analysts had only expected 520 million energetic users. This isn’t a direct financial metric, but it surely’s crucially necessary because energetic users are the lifeblood of a social-media business like Pinterest.
Pinterest’s CEO celebrates “impressive” results
Pinterest CEO Bill Ready called the corporate’s quarterly results “impressive,” and justifiably so. Pinterest’s second-quarter 2024 net income of $8.887 million is actually an improvement over the corporate’s net lack of $34.942 million within the year-earlier quarter.
As well as, Pinterest reported earnings of $0.29 per share, barely beating Wall Street’s consensus call for earnings of $0.28 per share. This particular result won’t live as much as Ready’s “impressive” characterization, but one can’t argue with the aforementioned Street beats.
Plus, here’s one other data point for the PINS stock bulls. Pinterest’s adjusted EBITDA totaled $179.912 billion, versus just $107.019 billion in 2023’s second quarter. That’s a 68% improvement in a bottom-line metric that more investors must listen to.
Pinterest’s sales growth guidance: Good, but not adequate
Despite these impressive quarterly stats, Pinterest stock collapsed 13% to $32.50 in midday trading on Wednesday. Apparently, the source of investor consternation was Pinterest’s current-quarter revenue guidance.
Specifically, Pinterest expects to generate third-quarter 2024 revenue of $885 million to $900 million. This indicates growth of 16% to 18% on a year-over-year basis.
In contrast, analysts estimated current-quarter revenue of $909 million for Pinterest. Is it possible that the experts on Wall Street simply overestimated Pinterest’s likely sales-growth trajectory?
Nevertheless, as typically happens, it’s not the analysts which are getting punished. As a substitute, investors took their frustration out on Pinterest, dumping the corporate’s shares wholesale.
Evidently, 16% to 18% revenue growth isn’t adequate anymore. Is the market too spoiled nowadays? Has the market lost its perspective of what’s reasonable?
Perhaps the market is drawing unfair comparisons to Pinterest’s social-media peers, and particularly the juggernaut Meta Platforms (NASDAQ:META). Meta just released blockbuster second-quarter results, and plenty of traders expected the corporate to knock it out of the park. Nevertheless, they don’t have to draw comparisons between Meta Platforms and Pinterest, which is like pitting a heavyweight boxing champion against a middleweight boxer.
Some food for thought – or is it just fear mongering?
There may also be fear that Pinterest’s food-and-beverage advertisers will pull out. JPMorgan analyst Doug Anmuth warned, “The optics of a lighter (third quarter) guide won’t help recently growing ad fears.” He added, “[S]ome will likely be concerned that food & beverage pressure — which has been isolated — could spread to other verticals with a potentially softer consumer.”
In an identical vein, Morgan Stanley analyst Brian Nowak cautioned, “Slowing in ad spend and shifts toward promotions or discounts from (food and beverage) firms could cause some weakness within the digital ad markets” Nowak concluded, “Ad platforms with fewer advertisers, more branded exposure are more in danger. Snap seems most in danger.”
Nevertheless, there’s nothing in Pinterest’s quarterly results or forward guidance suggesting that Anmuth’s and Nowak’s fears will actually change into a reality. Where’s the evidence that food/beverage advertisers will pull back or pull out? And, why would Pinterest predict 16% to 18% third-quarter revenue growth if an advertiser exodus is imminent?
All in all, the short sellers had a field day but, because the old saying goes, there’s nothing to fear but fear itself. Pinterest’s revenue will almost actually grow in Q3, and whether or not the corporate’s second-quarter results were “impressive,” they were not less than respectable. So, investors should consider buying Pinterest stock on the dip in expectation of a rally if and when the market’s irrational fear passes.