Pinterest Beats Q2 Revenue Expectations as User Monetization Continues To Improve

While Pinterest (PINS) posted mixed second-quarter results, we were pleased with user monetization, indicating continuing demand improvement from advertisers. Pinterest missed FactSet bottom-line expectations as investments in commerce and content enhancements continued. At the same time, we welcome that Bill Ready, the firm’s new CEO, will not run Pinterest as a growth-at-any-cost firm as he mentioned on the earnings call. Ready’s position at the helm is also supported by the firm’s new activist investor, Elliott Management.

While social networking is crowded, in our view, we remain confident that Pinterest can continue to differentiate itself and attract users, most of whom have the intent to shop or purchase, which would keep attracting more advertisers and ad dollars. We have adjusted our model due to increasing macroeconomic uncertainty and management’s third-quarter guidance. Our fair value estimate is now $46 per share, down from $48. In our view, this narrow-moat firm remains attractive.

Pinterest is a bit more resilient than its peers in the face of both an unstable macro environment and changes to Apple’s data privacy policies. As the firm and advertisers are aware, users on Pinterest are interested in shopping and/or buying, which increases the effectiveness of campaigns at the top, mid, and bottom of the marketing funnel. In addition, with the knowledge of such an intent, the app and its ad sales remain less dependent on Apple’s data regarding user behavior outside of the Pinterest app. We also agree with the firm that more advertisers may be willing to integrate their data with Pinterest’s, helping to further improve returns on the ads, and increase the number of ads sold and/or their prices.