Social media company Pinterest published earnings late Monday that topped expectations, helped by an 11% increase in revenue. PINS stock jumped on the third-quarter earnings report.
For the third-quarter ending Sept. 30, Pinterest reported adjusted earnings of 28 cents per share on revenue of $763 million. Analysts expected Pinterest to report adjusted earnings of 21 cents per share on revenue of $744 million, according to FactSet.
For Pinterest, adjusted earnings per share improved 154% year over year, while revenue climbed 11%.
On the stock market today, PINS stock gained 19% to close at 29.88. PINS stock was also upgraded by BofA Securities following its earnings.
PINS Stock: Net Income Swings To Profit
Pinterest reported net income of $6.7 million, compared to a $65 million loss in the same quarter last year.
Monthly active users of the Pinterest app climbed 8% to 482 million. That is an all-time high for Pinterest after it lost some users following an early pandemic surge, the company noted.
The average revenue Pinterest collects per user ticked up by 3% from last year to $1.61.
"We continued to accelerate the business in Q3," said Bill Ready, chief executive of Pinterest, in the earnings release. "We are driving strong revenue performance, robust global MAU growth, and substantial margin expansion."
Pinterest's Shopping Push
Ready, who took over as CEO in June 2022, has focused on boosting shopping within the Pinterest app.
"We know more than half our users view Pinterest as a place to shop, so our focus over the last year has been to make Pinterest more shoppable," Ready said on the earnings call.
In April, Pinterest announced it had agreed to a multiyear partnership to bring ads for Amazon products to Pinterest feeds.
Ready said on the company's earnings call that a partnership with Amazon is "ramping ahead of schedule."
But, he added, the project is a multi-quarter effort with most meaningful revenue not appearing until early next year.
The biggest improvement so far, Ready noted, is in the relevance of the ads Pinterest can serve to users.
Outlook For Q4
For the current fourth quarter, Pinterest expects revenue to grow between 11% and 13% year over year.
Last week, both Meta and Snap warned about the Israel-Hamas war causing some advertisers to slow their spending. Asked about those warnings, Ready said that Pinterest had seen some advertisers pause campaigns at the beginning of the conflict, but those companies have since restarted their spending.
Pinterest would not be immune if there is a broader advertising pullback, Ready added.
"But taking into account everything we know today, and what we've seen so far, we feel good about our ability to execute in the quarter," he said.
PINS Stock: Winning Bulls On Wall Street
The earnings report earned an upgrade from BofA Securities from neutral to buy.
"After a year of relative underperformance vs. larger peers, we expect significant focus on Pinterest into 2024 on renewed advertiser traction and impact of new ad partnerships," analyst Justin Post wrote.
Prior to earnings, Pinterest stock was upgraded by Stifel analyst Mark Kelley who saw potential in its new partnership with Amazon.
"The company's strong 3Q performance and raised margin guidance is in-line with the uptick in trends we noticed during our recent advertiser checks, and we remain bullish on the direction the company is headed," Kelley wrote in a separate client note following earnings Monday.
Evercore ISI analyst Mark Mahaney earlier this year named PINS stock the top pick among the small-cap to midcap stocks he covers. In a client note Monday, he highlighted that Pinterest's fourth quarter guidance implies a double-digit percentage growth in revenue with a double-digit decline in operating expenses — a rare combination.
"PINS continues to deliver remarkable leverage in the business as revenue growth recovers," Mahaney added.
PINS Stock: Technical Ratings
Prior to its surge post-earnings, Pinterest stock had gained just 4% this year prior to its earnings release Monday, compared to a roughly 8.5% gain for the S&P 500.
However, IBD's Stock Checkup tool show PINS stock has a strong 92 out of a best-possible 99 Composite Rating. The rating provides an overall score based on the stock's grade for each of the other IBD SmartSelect Ratings.
But PINS stock has a Relative Strength rating of 57 out of 99, indicating middling price performance for the stock compared to the rest of the market.
