Photo-sharing social-media platform Pinterest (NYSE:PINS) delivered expectation-beating second-quarter 2024 results on Wednesday. Furthermore, Pinterest anticipates moderate but respectable current-quarter revenue growth. However, traders immediately sold PINS stock, and investors can capitalize on this excessive response by considering buying a few shares.
Pinterest’s Q2-2024 global revenue grew 21% year over year to $854 million. Analysts had only called for $847.8 million in quarterly revenue, on average. So far, so good.
Furthermore, Pinterest’s global monthly active user count increased 12% to 522 million, a record for the company. That’s another beat, as analysts had only expected 520 million active users. This isn’t a direct financial metric, but it’s crucially important because active users are the lifeblood of a social-media business like Pinterest.
Pinterest’s CEO celebrates “impressive” results
Pinterest CEO Bill Ready called the company’s quarterly results “impressive,” and justifiably so. Pinterest’s second-quarter 2024 net income of $8.887 million is certainly an improvement over the company’s net loss of $34.942 million in the year-earlier quarter.
In addition, Pinterest reported earnings of $0.29 per share, slightly beating Wall Street’s consensus call for earnings of $0.28 per share. This particular result might not live up to Ready’s “impressive” characterization, but one can’t argue with the aforementioned Street beats.
Plus, here’s another 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 ought to pay attention to.
Pinterest’s sales growth guidance: Good, but not good enough
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?
However, as typically happens, it’s not the analysts that are getting punished. Instead, investors took their frustration out on Pinterest, dumping the company’s shares wholesale.
Evidently, 16% to 18% revenue growth isn’t good enough 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 especially the juggernaut Meta Platforms (NASDAQ:META). Meta just released blockbuster second-quarter results, and many traders expected the company to knock it out of the park. However, they don’t need 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 might 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 will not help recently growing ad fears.” He added, “[S]ome will be concerned that food & beverage pressure — which has been isolated — could spread to other verticals with a potentially softer consumer.”
In a similar vein, Morgan Stanley analyst Brian Nowak cautioned, “Slowing in ad spend and shifts toward promotions or discounts from (food and beverage) companies could cause some weakness in the digital ad markets” Nowak concluded, “Ad platforms with fewer advertisers, more branded exposure are more at risk. Snap seems most at risk.”
However, there’s nothing in Pinterest’s quarterly results or forward guidance suggesting that Anmuth’s and Nowak’s fears will actually become 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, as the old saying goes, there’s nothing to fear but fear itself. Pinterest’s revenue will almost certainly grow in Q3, and whether or not the company’s second-quarter results were “impressive,” they were at least 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.
