Pinterest’s Monthly Active Users In 1Q Fall Short Of Estimates; Shares Drop 11%

Pinterest’s (PINS) shares dropped 10.9% in extended-trading on Tuesday as the social media company reported monthly active users (MAUs) of 478 million in the first quarter, up by 30% year-on-year, but which fell short of analysts’ expectations of 480 million.

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The company reported revenues of $485 million in 1Q, up 78% year-on-year and beating analysts’ estimates of $471.7 million. PINS reported non-GAAP EPS of $0.11 per share versus a loss of $0.10 in the same quarter last year. Analysts were expecting EPS of $0.06 per share.

Pinterest’s CFO and Head of Business Operations, Todd Morgenfeld said, “Q1 results were strong, building off the momentum of 2020. Continued rapid growth of our international business and increased adoption from medium and small advertisers drove 78% year-over-year revenue growth. While we continue to navigate COVID-19 uncertainty, we plan to stay focused on driving investments that deliver an inspirational Pinner experience and measurable advertiser value.”

The company registered a 170% year-on-year jump in international revenues to $95 million, and a 91% rise in average revenue per user (ARPU) to $0.26 in international markets as it launched advertising on its platform in Brazil. Total ARPU in 1Q globally was $1.04, up 34% year-on-year.

The company expects that in 2Q, revenues will increase by 105% year-on-year, with global MAUs rising in mid-teens and US MAUs remaining flat year-on-year. PINS expects operating expenses to rise quarter-on-quarter as the company continues to increase its investments in long-term initiatives. (See Pinterest stock analysis on TipRanks)

Following the earnings, Robert W. Baird analyst Colin Sebastian lowered the price target from $90 to $80 and reiterated a Buy on the stock. Sebastian commented, “We expect shares to remain in the “penalty box” after management guided to a modest sequential decline in Q2 domestic MAUs [monthly active users], giving back some of the “covid cohort” of new users in 2020.”

“More positively, monetization trends continue to improve (pricing up ~46% Y/Y), benefiting from last year’s ad platform enhancements (e.g., conversion optimization, autobidding), increasing mix of SMBs [small and mid-market businesses], and ramp in shopping ads (>20% of revenues.) On the call, management highlighted a few product areas that should help improve Pinner engagement (e.g., Story Pins, shopping),” Sebastian added.

Overall, consensus on the Street is that PINS is a Moderate Buy based on 13 Buys and 9 Holds. The average analyst price target of $92.69 implies upside potential of about 19.4% to current levels.