Analyst Note| Ali Mogharabi |
Pinterest reported better-than-expected first-quarter results as the top and bottom lines beat our projections and FactSet consensus estimates. Revenue growth, which was driven by an increase in users and their monetization, drove non-GAAP operating margin expansion. While management guided for strong triple-digit revenue growth in the second quarter, it also does not expect year-over-year growth in U.S. users, which will result in a sequential decline in users. The firm also projects significant growth deceleration in international user additions as the pandemic last year pulled forward user growth. While we did not expect the firm to lose users after the pandemic subsided, we think the decline can be offset by higher ad prices as demand for the platform has strengthened. In addition, consumers who return to more outdoor activity may continue to use Pinterest and its features. In our view, all of this supports management’s strong revenue growth guidance. After slightly increasing our projections, we are raising our fair value estimate to $69 per share from $64. While the stock was down 11% after hours April 27, it was still trading slightly above our fair value estimate.