Despite exceeding Q3 top and bottom line expectations, weaker revenue guidance led to Pinterest (PINS – Free Report) stock falling over -15% last Friday.
While the visual recommendations provider didn’t receive a post-earnings spike like other social media stocks such as Meta Platforms (META – Free Report) and Snap (SNAP – Free Report) , investors may wonder if the selloff in PINS is overdone.
Pinterest Q3 Results
Reporting Q3 results after market hours last Thursday, Pinterest’s quarterly EPS of $0.40 was above the Zacks Consensus of $0.34 and soared 43% from $0.28 a share in the prior-year quarter. This came on sales of $898.37 million which edged Q3 estimates of $897.07 million and increased 17% from $763.2 million a year ago.
Notably, Pinterest has exceeded earnings expectations in each of its last four quarterly reports posting an average EPS surprise of 17%. Pinterest has beaten top line estimates in three of the last four quarters with an average sales surprise of 1.45%.
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Pinterest Outlook & Guidance
Although Pinterest’s financial results were favorable, Q4 revenue guidance of $1.12-$1.45 billion came in below many analysts’ estimates with the current Zacks Consensus calling for sales of $1.15 billion or 17% growth (Current Qtr below).
Based on Zacks estimates, Pinterest’s total sales are projected to increase 19% in fiscal 2024 and are forecasted to expand another 17% in FY25 to $4.25 billion. Even better, annual earnings are expected to soar 32% this year and are slated to climb another 20% in FY25 to $1.73 per share.
Increased spending to build out a suite of artificial intelligence automation tools played a part in Pinterest’s weaker-than-expected guidance along with lower demand for its Food and Beverage segment which includes recipes, meal planning ideas, and other culinary trends.
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Tracking PINS Stock Performance
Pinterest stock is down -17% this year with PINS seeing a modest rebound in this morning’s trading session. Like Snap which is down more than -20% year to date, Pinterest has vastly underperformed the broader indexes and Meta’s +64%.
Since going public in April of 2019, Pinterest stock is still up +24% to top Snap’s +4% during this period. Still, this has noticeably lagged the benchmark S&P 500 and the Nasdaq which are up over +100% while Meta shares have skyrocketed more than +200%.
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Pinterest Balance Sheet & Valuation
Trading around $30, Pinterest stock is more reasonably valued after its recent selloff at 20.3X forward earnings. This is well below Snap’s 50X forward earnings multiple and a slight discount to the benchmark’s 24.4X and Meta’s 26.1X.
Amid increased spending on AI, Pinterest’s balance sheet is reassuring with $2.44 billion in cash & equivalents at the end of Q3 2024. Furthermore, Pinterest has $3.49 billion in total assets which is nicely above its total liabilities of $597 million.
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Bottom Line
Pinterest stock currently lands a Zacks Rank #3 (Hold). Pinterest’s revenue guidance for Q4 may have been underwhelming, but PINS could reward investors from current levels especially those that commit to long-term positions. To that point, Pinterest’s push into AI could pay off by increasing the company’s operating efficiency with some analyst pointing to higher return on ad spend (ROAS) specifically.
