Pinterest Inc. (NYSE: PINS) stock suffered a 12% sell-off on its Q4 2023 earnings report. The main reason for the selling was a miss on the top line, as revenues failed to beat consensus analyst estimates.
Analysts expected 14% to 15% revenue growth, while Pinterest delivered 12%. Investors may want to use this downdraft as a buying opportunity in this computer and technology sector company since the underlying growth story is still intact. Pinterest improved on almost every financial metric in the quarter while growing its global monthly active users (MAUs) to nearly half a billion people.
No-drama zone
By being a drama-free, inspirational social commerce platform, Pinterest distinguishes itself from other social media platforms like Meta Platforms Inc. (NASDAQ: META) and Snap Inc. (NYSE: SNAP). Users use Pinterest for inspirational lifestyle, fashion, cooking and product ideas. It describes itself as a visual discovery platform. Its users share "pins" like a sticky pad with images and descriptions placed on virtual bulletin boards.
AI engines
Pinterest employs artificial intelligence (AI) and machine learning (ML) algorithms to rank pins and present personalized content discovery and recommendations to its users. It also enables users to search for relevant bulletin boards and topics to match their intent. AI is used to identify trending topics and personalize feeds. Get AI-powered insights on MarketBeat.
Growth is manifesting
On February 8, Pinterest reported Q4 2023 EPS of 53 cents, beating analyst estimates by a penny:
- 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 Q4 2023 and $683 million for the full year 2023.
- Revenues grew 12% YOY to $981.26 million, falling short of the $991.31 million consensus analyst estimates, cratering the stock.
Revenue growth metrics
Revenue growth was 8% in the United States and Canada, its largest market with $779 million. Europe experienced 32% YOY growth with revenues of $162 million. The rest of the world experienced 27% YOY growth at $41 million.
MAU growth metrics
Total MAUs rose 11% YOY to 498 million. Incidentally, the smallest population of users generates the majority of the revenue:
- The United States and Canada rose by 2% to 97 million members.
- Europe saw 8% YOY growth to 135 million members.
- The rest of the world experienced 15% YOY growth to 266 million.
Pinterest noted that Gen. Z-ers continue to be its top-growing user demographic.
ARPU growth metrics
The average revenue per user (ARPU) can be deceiving when looking at percentage growth. The United States and Canada saw a 6% YOY rise in ARPU to $8.07. Europe saw a 23% rise to $1.23; the rest of the world saw an 11% rise to just 15 cents.
Q1 2024 guidance
Pinterest provided non-GAAP forward revenue guidance for Q1 2024. The company expected revenues to rise 15% to 17% between $690 million to $705 million versus $702.54 million consensus estimates. Non-GAAP operating expenses are expected to grow 9% to 13% YOY from $450 million to $465 million.
Partnerships with Google
Pinterest announced a third-party ad integration with Alphabet Inc. (NASDAQ: GOOGL). The focus is monetizing international markets by enabling ads to be served on Pinterest through Google's ad manager.
Third-party ad demand is scaling as expected. While the revenue impact isn't significant currently, it will be a meaningful contributor as it continues to grow moving forward. Google would be the second ad partner for Pinterest after Amazon.com Inc. (NASDAQ: AMZN).
Deliciously Entertaining
On February 20, Pinterest announced a partnership with media company Tastemade to launch its first-ever streaming TV show, Deliciously Entertaining. The cooking and lifestyle series will premiere on February 23, on the Tastemade streaming channel. The show will have an actionable and shoppable experience on Pinterest.
CEO insights
Pinterest CEO Bill Ready stated that 2023 was its most productive year yet, as the company accelerated product velocity. Ready commented, “Pinterest is the rare business where the interests of users and advertisers are aligned. It's proven to be true as we continue to post double-digit revenue growth and have achieved an all-time high for global MAU. The changes we made have set us up to be a stronger and more efficient company as we double down on our momentum in 2024.”
Check out Pinterest analyst ratings and price targets on MarketBeat. Look for Pinterest's peers and competitor stocks with the MarketBeat stock screener.
Daily rising wedge breakdown
The daily candlestick chart on PINS illustrates a rising wedge breakdown pattern. This is comprised of an uptrend forming higher highs and higher lows with a tightening range as it nears the apex point and collapses.
The breakdown occurred on the earnings report gap down to the $37.57 gap fill level, breaking under the $37.90 daily market structure low (MSL) trigger. The daily 50-period moving average (MA) support became a resistance akin to being trapped under a pool tarp. The daily relative strength index (RSI) dropped from the 70-band to the 40-band. The pullback support levels are at $34.50, $33.59, $32.46 and $31.48.
