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Zacks Rank #1 (Strong Buy) stock Pinterest ((PINS - Free Report) ) is a social media platform and visual discovery engine that empowers users to discover, save, and share ideas and inspirations on virtual pinboards. Users can create themed boards and “pin” images, videos, and links from the internet or within the platform, organizing them based on their interests, hobbies, or projects. Pinterest serves as a digital hub for users to find inspiration for various aspects of life, including home décor, fashion, recipes, travel, and more. Pinterest is unique because it enables users to explore content curated by others and drives connections with people who share similar interests.
Blockbuster Q3 Earnings
On October 31st, Pinterest announced stellar third-quarter results:
· Revenue growth reached 11% year-over-year, the highest quarterly revenue growth in the past four quarters.
· Global monthly active users (MAUs) came in 8% higher and are growing steadily.
Meanwhile, EPS grew at a robust 155% year-over-year, smashing Zacks Consensus Estimates by 33%.
Image Source: Zacks Investment Research
Amazon Partnership Begins to Bear Fruit
Pinterest generates most of its revenues by delivering ads on its website and mobile applications. Earlier this year, Pinterest inked a multiyear ads partnership with Amazon. On Pinterest’s earnings call, the CEO touted the partnership by saying:
"..we see really good progress. We're testing, learning, iterating and we're focused on creating a really great relevant user experience and valuable merchant experience. And we're really pleased with what we're seeing on that front. That's the biggest breakthrough and this is demonstrating the increase in relevancy from bringing on third-party demand. As I noted in the prior question, 50% increase in relevance on search and 100% increase in relevance on related items, I that just bodes really well for where we can go with that. So those are the biggest things to solve for. As we've been calling out, it is a multi-quarter implementation with the most meaningful revenue to hit early in '24."
Analysts are Playing Catchup
Zacks exhaustive studies of the biggest stock market winners proves that increasing earnings estimates is the single most important critical factor to consider. Recently, several analysts revised Pinterest’s earnings estimates higher, and Zacks Consensus Estimates now predict blistering growth of 50% or more for the next three quarters.
Image Source: Zacks Investment Research
The Magic of Post Earnings Drift
Post-earnings drift refers to the tendency of a stock’s price to continue moving in the same direction as the initial price reaction. When a company reports stronger than anticipated results, institutional investors pile into shares. However, because these deep-pocketed investors tend to accumulate shares over time, often the initial gap in price is just the beginning. In other words, powerful earnings gaps lead to big trends. Nvidia’s ((NVDA - Free Report) ) two positive earnings reactions in 2016 represent an example of this phenomenon.
Image Source: TradingView
Following its Q3 earnings, Pinterest shares launched higher by 19% on volume 5x the norm. Large price moves coupled with heavy volume are indicative of institutional accumulation. PINS is now hovering near the $30 mark – an area where the stock has run into resistance several times.
Image Source: TradingView
Bottom Line
Pinterest shares have been stagnant for years. However, improved earnings, a key partnership, and higher analyst expectations suggest that Pinterest has turned the corner and is poised to move much higher over the next year.
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Bull of the Day: Pinterest (PINS)
Company Overview
Zacks Rank #1 (Strong Buy) stock Pinterest ((PINS - Free Report) ) is a social media platform and visual discovery engine that empowers users to discover, save, and share ideas and inspirations on virtual pinboards. Users can create themed boards and “pin” images, videos, and links from the internet or within the platform, organizing them based on their interests, hobbies, or projects. Pinterest serves as a digital hub for users to find inspiration for various aspects of life, including home décor, fashion, recipes, travel, and more. Pinterest is unique because it enables users to explore content curated by others and drives connections with people who share similar interests.
Blockbuster Q3 Earnings
On October 31st, Pinterest announced stellar third-quarter results:
· Revenue growth reached 11% year-over-year, the highest quarterly revenue growth in the past four quarters.
· Global monthly active users (MAUs) came in 8% higher and are growing steadily.
· Double-digit forward earnings growth expectation,
Meanwhile, EPS grew at a robust 155% year-over-year, smashing Zacks Consensus Estimates by 33%.
Image Source: Zacks Investment Research
Amazon Partnership Begins to Bear Fruit
Pinterest generates most of its revenues by delivering ads on its website and mobile applications. Earlier this year, Pinterest inked a multiyear ads partnership with Amazon. On Pinterest’s earnings call, the CEO touted the partnership by saying:
"..we see really good progress. We're testing, learning, iterating and we're focused on creating a really great relevant user experience and valuable merchant experience. And we're really pleased with what we're seeing on that front. That's the biggest breakthrough and this is demonstrating the increase in relevancy from bringing on third-party demand. As I noted in the prior question, 50% increase in relevance on search and 100% increase in relevance on related items, I that just bodes really well for where we can go with that. So those are the biggest things to solve for. As we've been calling out, it is a multi-quarter implementation with the most meaningful revenue to hit early in '24."
Analysts are Playing Catchup
Zacks exhaustive studies of the biggest stock market winners proves that increasing earnings estimates is the single most important critical factor to consider. Recently, several analysts revised Pinterest’s earnings estimates higher, and Zacks Consensus Estimates now predict blistering growth of 50% or more for the next three quarters.
Image Source: Zacks Investment Research
The Magic of Post Earnings Drift
Post-earnings drift refers to the tendency of a stock’s price to continue moving in the same direction as the initial price reaction. When a company reports stronger than anticipated results, institutional investors pile into shares. However, because these deep-pocketed investors tend to accumulate shares over time, often the initial gap in price is just the beginning. In other words, powerful earnings gaps lead to big trends. Nvidia’s ((NVDA - Free Report) ) two positive earnings reactions in 2016 represent an example of this phenomenon.
Image Source: TradingView
Following its Q3 earnings, Pinterest shares launched higher by 19% on volume 5x the norm. Large price moves coupled with heavy volume are indicative of institutional accumulation. PINS is now hovering near the $30 mark – an area where the stock has run into resistance several times.
Image Source: TradingView
Bottom Line
Pinterest shares have been stagnant for years. However, improved earnings, a key partnership, and higher analyst expectations suggest that Pinterest has turned the corner and is poised to move much higher over the next year.