Here’s why you might want to consider Pinterest

Pinterest Inc. NYSE: PINS the stock suffered a 12% sell-off on its Q4 2023 earnings report. The primary reason for the sell-off was a revenue loss, as revenues failed to beat analysts’ consensus estimates.

Analysts expected revenue growth of 14% to 15%, while Pinterest saw a 12% increase. Investors may want to use this downdraft as a buying opportunity in this computer and technology company as the underlying growth story is still intact. Pinterest improved nearly every financial metric in the quarter, while growing its global monthly active users (MAU) to nearly half a billion people.

Drama-free area

As an inspirational and drama-free social commerce platform, Pinterest stands out from other social media platforms like Meta Platform Inc. NASDAQ: META AND Snap Inc. NYSE: SNAP. Users use Pinterest to find inspiration for lifestyle, fashion, cooking and product ideas. It describes itself as a visual discovery platform. Its users share “pins” as a sticky pad with images and descriptions placed on virtual message boards.

AI Engines

Pinterest uses artificial intelligence (AI) and machine learning (ML) algorithms to classify pins and present personalized content discoveries and recommendations to its users. It also allows users to search for relevant boards and topics to suit their intentions. Artificial intelligence is used to identify trending topics and personalize feeds. Obtain AI-powered insights on MarketBeat.

Growth is happening

On Feb. 8, Pinterest reported fourth-quarter 2023 earnings per share of 53 cents, beating analysts’ estimates by a cent:

• Adjusted EBITDA grew 86% year over year (YOY) to $365 million.
• GAAP net income was $201 million.
• GAAP net loss was $36 million.
• Adjusted EBITDA was $365 million for the fourth quarter of 2023 and $683 million for full-year 2023.
• Revenue grew 12% year-over-year to $981.26 million, below consensus analyst estimates of $991.31 million, sending the stock tumbling.

Revenue growth metrics

Revenue growth was 8% in the U.S. and Canada, its largest market at $779 million. Europe saw year-over-year growth of 32% with revenues of $162 million. The rest of the world recorded year-on-year growth of 27% or $41 million.

MAU growth metrics

Total MAUs increased 11% year over year to 498 million. Incidentally, the smallest population of users generates the most revenue:

• The United States and Canada increased 2% to 97 million members.
• Europe saw 8% year-on-year growth reaching 135 million members.
• The rest of the world recorded year-on-year growth of 15% to 266 million.

Pinterest noted that Gen Z users continue to be the fastest-growing user demographic.

ARPU growth metrics

Average revenue per user (ARPU) can be misleading when considering percentage growth. The US and Canada saw a 6% year-over-year increase in ARPU to $8.07. Europe saw a 23% increase to $1.23; the rest of the world saw an 11% increase to just 15 cents.

Guidance for the first quarter of 2024

Pinterest provided non-GAAP guidance on forward revenue for the first quarter of 2024. The company expected revenue to grow 15% to 17% to between $690 million and $705 million versus consensus estimates of 702.54 Millions of dollars. Non-GAAP operating expenses are expected to increase 9% to 13% year over year, from $450 million to $465 million.

Partnership with Google

Pinterest has announced a third-party advertising integration with Alphabet Inc. NASDAQ:GOOGL. The goal is to monetize international markets by allowing ads to be served on Pinterest via Google’s ad manager.

Demand for third-party ads is growing as expected. While the revenue impact is not significant at the moment, it will make a significant contribution as it continues to grow in the future. Google would be the second advertising partner for Pinterest after Amazon.com Inc. NASDAQ:AMZN.

Delightfully funny

On February 20, Pinterest announced a partnership with media company Tastemade to launch its first streaming television show, Deliciously Entertaining. The cooking and lifestyle series will premiere on February 23 on the Tastemade streaming channel. The show will have an experience that can be viewed and purchased on Pinterest.

Insights from the CEO

Pinterest CEO Bill Ready said 2023 was its most productive year ever as the company ramped up product speed. Ready commented: “Pinterest is the rare business where the interests of users and advertisers are aligned. This has proven true as we continue to experience double-digit revenue growth and have reached an all-time high for global MAU. The changes we have made have allowed us to become a stronger and more efficient company as we double our momentum in 2024.”

Watch Pinterest analyst ratings and price targets on MarketBeat. Research Pinterest competitor and competitor stocks with MarketBeat’s stock screener.

Daily breakdown of the ascending wedge

The daily candlestick chart on PINS illustrates a rising wedge distribution pattern. This is composed of an uptrend that forms higher highs and higher lows with a range that narrows as it approaches the apex point and collapses.

The collapse occurred on the earnings report gap to the gap filling level of $37.57, breaking below the daily market structure (MSL) low of $37.90. The 50-period daily moving average (MA) support has become resistance similar to being trapped under a pool towel. The daily relative strength index (RSI) fell from the 70 band to the 40 band. The pullback support levels are at $34.50, $33.59, $32.46, and $31.48.

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