Image service Pinterest with significantly higher profit margin.

Last Updated: 12. Februar 2024By

Last Friday, the shares of Pinterest closed with a loss of almost 10% in trading. However, the social media and marketing platform was able to show double-digit revenue growth for the second consecutive quarter.

What were the numbers in detail? What can investors expect in the coming months and how do analysts estimate the potential of Pinterest’s stock?

Photo platform with network effect Pinterest is a social internet service in the field of photo hosting. Users can upload pictures on the platform (online or app), categorize them into different topics, and share them with other users. This way, users have the opportunity to save interesting, inspiring, or useful content on their virtual pinboards and add comments or discover content on other users‘ pinboards.

Currently, 498 million users worldwide use Pinterest monthly to search through over 175 billion pieces of content in various topics such as cooking, traveling, weddings, parties, fashion, interior design, gardening, sports, and more.

Pinterest mainly earns money through advertisements on the platform, especially with so-called promoted pins. These are creative posts on the social network created by advertisers. The focus is on products or services that can be purchased for a fee. As the platform operator, the social network receives a share of the revenue from the sale of linked products.

Growth dynamics pick up again In the final quarter, the revenues of the social media platform increased by 12% to $981 million. This slightly missed analyst estimates (source: Seeking Alpha) by $9 million, but the growth dynamics picked up again. For comparison: in the previous quarter, revenue growth was only 11% (Q2 2023: 6%; Q1 2023: 5%; Q4 2022: 4%).

In terms of user numbers, the following was reported: In the US, the number of monthly active users was at 97 million, slightly above the previous year’s level (95 million). Internationally, the number of users increased by 35 million to 266 million, while 135 million customers accessed the network monthly in Europe (Q4 2022: 124 million). Overall, this resulted in an increase in user numbers of 48 million compared to the previous year, reaching a total of 498 million.

Profit margin significantly improves In the end, Pinterest achieved an adjusted earnings before interest, taxes, and depreciation (EBITDA) of $365 million. This was significantly 86% higher than in the same period of the previous year. The EBITDA margin improved accordingly from 22% to 37%. One reason for this is the focus on costs: for example, research and development costs decreased to $161 million, which corresponds to 16% of total revenues. In the same quarter of the previous year, the ratio was still 19% of revenues.

Lucrative users in the US It is also interesting to take a look at the monetization of individual users: Although only just over one-fifth (19.4%) of users come from the US, the domestic market was responsible for 79.7% of total revenues. Per user, Pinterest generated a revenue of $8.07 in North America & Canada (vs. $7.60 in the previous year’s quarter). In comparison, users in Europe were significantly less lucrative with a revenue of $1.23 (vs. $1.01 in the previous year’s quarter). In the rest of the world, the company only earned 15 cents per user, but this was 7% higher than the previous year’s level.

Further growth in sight Meanwhile, the Pinterest management is aiming for further growth. In the first quarter, the company is targeting a revenue increase of 15 to 17% to $690 to $705 million. At the same time, (non-GAAP) operating costs are expected to increase by 9 to 13% to $450 to $465 million.

No consensus among analysts Meanwhile, analysts are cautious: Of the 36 analysts covering the stock, 14 recommend only holding the stock. Another 19 Wall Street bankers recommend buying the shares.

Based on consensus estimates of $1.33 earnings per share in 2023, the stock is valued at a price-earnings ratio of 27. On average, analysts estimate the fair value of the stock at $42.21. In comparison, the stock closed at $36.37 on Friday.