Analyst Note| Ali Mogharabi |
Pinterest’s fourth-quarter results easily beat our projections and the FactSet consensus estimates as user growth and higher ad spending drove strong revenue growth, which led to margin expansion. As we had expected, the coronavirus pandemic, along with the overall shift to digital commerce, pushed consumers to increase online spending, which drove the urge to discover ideas on Pinterest, which then attracted more advertisers to the platform. However, Pinterest’s network effect is strengthening much faster than we anticipated. We have increased our top- and bottom-line projections for the firm, resulting in an increase in our fair value estimate to $64 from $42. However, we recommend new investors wait for a pullback before committing capital to this narrow-moat name.