The past few months have been particularly challenging for Pinterest’s shares (NYSE: PINS). The stock faced a severe downturn over the summer after the company issued a stark warning regarding slower revenue growth when it released its second-quarter results. This downturn was exacerbated after the third-quarter results were announced, as investors expressed their disappointment with the company’s fourth-quarter guidance, causing the stock to plummet further.
Let’s delve into Pinterest’s latest results and future guidance to determine whether this presents a prime opportunity to purchase the stock at a lower price.
Another disappointing forecast
Pinterest reported another quarter of commendable revenue growth, with its total revenue climbing 18% year-over-year to reach $898.4 million. Even so, this figure reflects a continued slowing of growth, down from 23% in Q1 and 21% in Q2. In the U.S. and Canada, revenue experienced a 16% increase to $719 million, while European revenue rose by 20% to $137 million. Notably, the revenue from the rest of the world (ROW) demonstrated impressive growth, jumping 38% to $42 million.
Monthly active users (MAUs) expanded by 11% to total 537 million, primarily supported by a significant 16% growth in ROW users, which reached 300 million. U.S. and Canadian MAUs saw a modest increase of 3% to 99 million, and European users grew by 8% to 139 million.
A crucial metric for Pinterest is average revenue per user (ARPU), as it represents the company’s primary opportunity to close the monetization gap with competitors and better leverage its user base in the future.
On the whole, ARPU climbed by 5% to $1.70. However, analyzing trends on a regional basis is often more insightful since ARPU levels can vary significantly. In the U.S. and Canada, ARPU surged by 13% to $7.31. Meanwhile, European ARPU experienced an 11% increase to $1, while for the rest of the world, ARPU soared by 18% to $0.14.
Pinterest’s profitability also showed promise, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increasing by 31% to $242 million. Adjusted earnings per share (EPS) impressively rose by 43% to $0.40.
Pinterest is forecasting Q4 revenue to fall between $1.125 billion and $1.145 billion, indicating a year-over-year growth of only 15% to 17%. This projection suggests a continued deceleration in revenue growth. The company has indicated that it is experiencing challenges in the food and beverage vertical, a trend expected to persist into Q4. Nevertheless, Pinterest is witnessing promising developments in lower funnel revenue.
Is this a golden opportunity to buy the dip?
For the second consecutive quarter, Pinterest’s stock plummeted on disappointing guidance. Even though the food and beverage advertising sector is encountering setbacks and reducing its ad spending, numerous positive developments are taking place at Pinterest.
Regional ARPU continues to grow steadily, and the company is set to expand its lucrative partnership with Amazon into Canada and Mexico. Furthermore, Pinterest remains committed to enhancing its collaboration with Alphabet to optimize user monetization strategies in emerging markets and is actively engaging resellers to support these efforts.
The company has also rolled out its Performance+ automation platform, which facilitates improved ad campaign creation, making it generally available to advertisers starting in October. Additionally, Pinterest plans to introduce Performance+ with ROAS (return on ad spend) in Q1, which is anticipated to serve as a growth driver heading into 2025.
Currently trading at a forward price-to-earnings (P/E) ratio around 17 based on 2025 analyst estimates, Pinterest stock presents an attractive opportunity given the promising pathways ahead.
PINS PE Ratio (Forward 1y) data by YCharts
Pinterest’s stock has proven to be an attractive valuation despite the investor disappointment over its slowing growth. The company retains abundant opportunities to enhance user monetization both domestically and internationally. Combined with Performance+, these efforts could reignite revenue growth as the new year unfolds.
I believe that the recent dip in Pinterest’s stock price represents a unique opportunity to acquire this growth stock.
Should you invest $1,000 in Pinterest right now?
Before considering investing in Pinterest, it’s important to take this into account:
The Motley Fool Stock Advisor analyst team recently identified what they consider the 10 best stocks for investors to consider… and Pinterest was not included. The selected stocks have the potential to yield significant returns in the years to come.
For instance, if Nvidia made that list on April 15, 2005, investing $1,000 at the time would be worth a staggering $896,358!*
Stock Advisor equips investors with a straightforward roadmap for success, inclusive of portfolio building advice, regular analyst updates, and two new stock picks each month. The Stock Advisor service has remarkably more than quadrupled the returns of the S&P 500 since its inception in 2002*.
*Stock Advisor returns as of November 11, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet and Pinterest. The Motley Fool holds positions in and recommends Alphabet, Amazon, and Pinterest. The Motley Fool adheres to a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
How does Pinterest’s user growth impact its revenue potential and investor confidence?
**Interview with Financial Analyst Jane Doe on Pinterest’s Current Situation**
**Interviewer:** Good afternoon, Jane. Thanks for joining us today to discuss the latest developments with Pinterest’s stock. As we’ve seen recently, the stock has faced a significant downturn. What would you say were the main contributors to this decline?
**Jane Doe:** Thank you for having me. The decline in Pinterest’s stock can primarily be attributed to the company’s disappointing guidance after their earnings reports. They warned investors about slower revenue growth, and their forecast for Q4 indicated continued deceleration, which understandably raised concerns among investors. The advertising sector’s challenges, particularly in food and beverage, also played a significant role in affecting investor sentiment.
**Interviewer:** Despite the drop in stock value, Pinterest did report an 18% increase in revenue year-over-year. How do you reconcile that with the negative market response?
**Jane Doe:** That’s an excellent point. While the revenue growth is commendable, it has been slowing down from previous quarters. Investors tend to focus on growth rates and future projections. The concern is not just about current revenue but rather about the trajectory of that growth. The slower-than-expected revenue growth and lower guidance usually translate into fears that Pinterest is losing its competitive edge in monetizing its user base.
**Interviewer:** Pinterest’s user base did grow, with monthly active users increasing to 537 million. Does this growth not indicate a positive outlook for the company?
**Jane Doe:** It does indicate potential, and a growing user base is indeed a critical metric. However, the challenge lies in monetizing that user growth effectively. Pinterest’s average revenue per user (ARPU) has increased, particularly in the U.S. and Canada, but still lags behind competitors. Investors are keen on seeing a more substantial impact on revenue from this growth.
**Interviewer:** Looking at the potential for investment, do you think now is a good time to buy Pinterest stock given its lower price?
**Jane Doe:** It could be considered a buying opportunity for investors who believe in Pinterest’s long-term potential and its strategies to improve user monetization. The company has announced initiatives like the Performance+ automation platform, which could enhance advertising revenue. However, potential investors should weigh this against the risks posed by their current challenges and the competition in the social media advertising space.
**Interviewer:** do you think Pinterest has a solid pathway ahead to recover?
**Jane Doe:** There are promising developments, especially with plans to expand partnerships and optimize monetization strategies. If they can capitalize on these opportunities and navigate the challenges in the advertising landscape, they may rejuvenate growth. However, it’s essential for investors to remain cautious and monitor how these strategies unfold in the coming quarters.
**Interviewer:** Thank you, Jane, for your insights! It seems that while there are challenges ahead, potential opportunities exist for those willing to invest cautiously.
**Jane Doe:** Absolutely, and thank you for having me. It’s always a pleasure to discuss such interesting company dynamics with you!
