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Pinterest (PINS) Shows Downtrend in Estimates: Reason to Worry?
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Pinterest, Inc. (PINS - Free Report) is currently witnessing a downtrend in estimate revisions after the second-quarter 2024 earnings release. Earnings estimates for Pinterest for 2024 have moved down 2.1% to $1.43 over the past 30 days, while the same for 2025 have decreased 2.3% to $1.72. The negative estimate revision portrays bearish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
What Ails Pinterest?
Pinterest expects operating expenses to increase substantially in the near term for expanding operations domestically and internationally, enhancing product offerings, broadening Pinner and advertiser base, expanding marketing channels, hiring additional employees and developing technology. Increased infrastructure spending related to user and engagement growth is likely to result in higher cost of revenues. Non-GAAP operating expenses are likely to grow by 17% to 20% year over year in third-quarter 2024 to $485 million to $500 million, driven by headcount growth, higher R&D, increased marketing and general and administrative expenses.
In addition, Pinterest faces significant competition from larger, more established companies such as Amazon, Facebook (including Instagram), Google, Snap and Twitter. These companies provide their users with a variety of online products, services, content (including video) and advertising offerings, including web search engines, social networks and other means of discovering, using or acquiring goods and services. PINS also faces competition from smaller firms, including Allrecipes, Houzz and Tastemade, which offer users engaging content and commerce opportunities through similar technology, products and features or services.
The Tailwinds
Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. Through various innovations, it continues to dramatically improve the advertising platform, which presently appears to be one of the best ad platforms for consumer discretionary brands looking for new ways to reach customers and stretch smaller ad budgets. Pinterest’s Verified Merchants Program allows brands to create a catalog of shoppable products on the app and use special re-targeting capabilities in their ads.
In addition, Pinterest is taking various initiatives to bring more actionable content on the platform from a wide range of sources such as users, creators, publishers and retailers. This has resulted in a solid improvement in engagement metrics like sessions, impressions and saves across all regions. Healthy traction in emerging verticals like men’s fashion, auto, health and travel are tailwinds.
Rising engagement among Gen Z users is a positive factor as well. Management's decision to increase the accessibility of mobile deep linking (MDL) products to more advertisers has improved shoppability on the platform. The MDL solution is well-suited for retailers who are aiming to drive more purchases through their mobile app. This has significantly boosted shopping ads revenue generation.
AI Focus
The company’s focus on improving operational rigor and incorporation of sophisticated AI models to enhance relevancy and personalization is likely to bring long-term benefits. Pinterest is also emphasizing building new ad tools and formats to help grow the scope of monetization on the platform. This will enable advertisers to measure the results and conversion rates, which will improve their decision-making. It has partnered with Amazon.com, Inc. (AMZN - Free Report) to further capitalize on the commercial intent of its user base and increase shoppability on its platform.
The acquisition of the AI-powered, high-tech fashion-shopping platform, The Yes, has enabled it to create a strategic organization to help steer the evolution of its features and merchants. Pinterest and The Yes share a common vision of making it easy for customers to find products matching their tastes and styles. The combined company has been making continuous efforts to absorb creators publishing videos and live streams to make the shopping experience swift and easy for customers.
Price Performance
Pinterest has declined 23.5% over the past three months against the industry’s growth of 2.3%. It has outperformed its peers like Snap Inc. (SNAP - Free Report) but lagged Meta Platforms, Inc. (META - Free Report) over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Pinterest appears to be relatively expensive compared to the industry but below its mean. Going by the price/sales ratio, the company shares currently trade at 5.39 forward sales, higher than 2.55 for the industry but lower than the stock’s mean of 7.
Image Source: Zacks Investment Research
End Note
Pinterest is witnessing solid net sales growth backed by strong user engagement across all regions. Enhancements in lower funnel solutions like MDL, shopping ads and API for conversions are providing a sustained return on investment to advertisers. Through third-party ad integration with Google, Pinterest aims to introduce monetization opportunities in several unmonetized international markets.
However, increasing competition from other video-centric consumer apps is likely to adversely impact user engagement to some extent. High operating expenses to expand operations and incorporate the latest technological innovations are expected to dent its profitability. It also appears to be trading at a relatively expensive level at the moment. The downtrend in estimate revisions and declining stock price performance further signifies bearish sentiments on the stock. With a Zacks Rank #4 (Sell), Pinterest appears to be lurking in the forsaken territory and investors could be better off if they avoid this stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Pinterest (PINS) Shows Downtrend in Estimates: Reason to Worry?
Pinterest, Inc. (PINS - Free Report) is currently witnessing a downtrend in estimate revisions after the second-quarter 2024 earnings release. Earnings estimates for Pinterest for 2024 have moved down 2.1% to $1.43 over the past 30 days, while the same for 2025 have decreased 2.3% to $1.72. The negative estimate revision portrays bearish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
What Ails Pinterest?
Pinterest expects operating expenses to increase substantially in the near term for expanding operations domestically and internationally, enhancing product offerings, broadening Pinner and advertiser base, expanding marketing channels, hiring additional employees and developing technology. Increased infrastructure spending related to user and engagement growth is likely to result in higher cost of revenues. Non-GAAP operating expenses are likely to grow by 17% to 20% year over year in third-quarter 2024 to $485 million to $500 million, driven by headcount growth, higher R&D, increased marketing and general and administrative expenses.
In addition, Pinterest faces significant competition from larger, more established companies such as Amazon, Facebook (including Instagram), Google, Snap and Twitter. These companies provide their users with a variety of online products, services, content (including video) and advertising offerings, including web search engines, social networks and other means of discovering, using or acquiring goods and services. PINS also faces competition from smaller firms, including Allrecipes, Houzz and Tastemade, which offer users engaging content and commerce opportunities through similar technology, products and features or services.
The Tailwinds
Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. Through various innovations, it continues to dramatically improve the advertising platform, which presently appears to be one of the best ad platforms for consumer discretionary brands looking for new ways to reach customers and stretch smaller ad budgets. Pinterest’s Verified Merchants Program allows brands to create a catalog of shoppable products on the app and use special re-targeting capabilities in their ads.
In addition, Pinterest is taking various initiatives to bring more actionable content on the platform from a wide range of sources such as users, creators, publishers and retailers. This has resulted in a solid improvement in engagement metrics like sessions, impressions and saves across all regions. Healthy traction in emerging verticals like men’s fashion, auto, health and travel are tailwinds.
Rising engagement among Gen Z users is a positive factor as well. Management's decision to increase the accessibility of mobile deep linking (MDL) products to more advertisers has improved shoppability on the platform. The MDL solution is well-suited for retailers who are aiming to drive more purchases through their mobile app. This has significantly boosted shopping ads revenue generation.
AI Focus
The company’s focus on improving operational rigor and incorporation of sophisticated AI models to enhance relevancy and personalization is likely to bring long-term benefits. Pinterest is also emphasizing building new ad tools and formats to help grow the scope of monetization on the platform. This will enable advertisers to measure the results and conversion rates, which will improve their decision-making. It has partnered with Amazon.com, Inc. (AMZN - Free Report) to further capitalize on the commercial intent of its user base and increase shoppability on its platform.
The acquisition of the AI-powered, high-tech fashion-shopping platform, The Yes, has enabled it to create a strategic organization to help steer the evolution of its features and merchants. Pinterest and The Yes share a common vision of making it easy for customers to find products matching their tastes and styles. The combined company has been making continuous efforts to absorb creators publishing videos and live streams to make the shopping experience swift and easy for customers.
Price Performance
Pinterest has declined 23.5% over the past three months against the industry’s growth of 2.3%. It has outperformed its peers like Snap Inc. (SNAP - Free Report) but lagged Meta Platforms, Inc. (META - Free Report) over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Pinterest appears to be relatively expensive compared to the industry but below its mean. Going by the price/sales ratio, the company shares currently trade at 5.39 forward sales, higher than 2.55 for the industry but lower than the stock’s mean of 7.
Image Source: Zacks Investment Research
End Note
Pinterest is witnessing solid net sales growth backed by strong user engagement across all regions. Enhancements in lower funnel solutions like MDL, shopping ads and API for conversions are providing a sustained return on investment to advertisers. Through third-party ad integration with Google, Pinterest aims to introduce monetization opportunities in several unmonetized international markets.
However, increasing competition from other video-centric consumer apps is likely to adversely impact user engagement to some extent. High operating expenses to expand operations and incorporate the latest technological innovations are expected to dent its profitability. It also appears to be trading at a relatively expensive level at the moment. The downtrend in estimate revisions and declining stock price performance further signifies bearish sentiments on the stock. With a Zacks Rank #4 (Sell), Pinterest appears to be lurking in the forsaken territory and investors could be better off if they avoid this stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.